Updated Filipino Online Workers Guide To Paying Taxes – 2018

In this world nothing can be said to be certain, except death and taxes. – Benjamin Franklin

A lot of online workers have been getting away with NOT paying taxes. I understand that many of us justify not giving our hard-earned money to corrupt government officials. Why pay taxes when you know most of what you’re paying will just line the pockets of greedy and corrupt politicians?

But paying taxes is each Filipino citizen’s obligation. Contrary to popular belief, taxes don’t just go to dirty politicians’ pockets. They also go to building schools, bridges and hospitals. Not paying taxes actually hurts the people who need it most– like students, patients, and farmers– more than it punishes corrupt officials.

With the recent barrage of high profile stories in the media about online workers earning millions, the BIR is looking for ways to catch and punish people who don’t pay taxes. It won’t be long before the BIR finds an online worker and makes an example of him.

Besides helping those who need it most and avoiding becoming a public example, paying your taxes also makes it easier for you to obtain a loan, credit card, passport or visa because these applications all require your tax documents.

Think about it this way– filing and paying your taxes NOW will protect you from the wrath of the BIR in the future.

As Easy As RFP?

The TV ads make it all look so easy. Just register, file and pay.

But the truth is the BIR is still working on how to categorize online workers. We’re not employees in a traditional sense. In some ways we are business owners but most of us don’t operate the same way most businesses do. It’s this limbo situation that complicates the tax system for online workers and discourages many from filing.

To make things easier, we consulted with a BIR certified accountant and an auditor who has a lot of experience with online workers. Not only did he explain in great detail how online workers can register, file and pay, he also taught us how to compute taxes, so you only pay exactly what you owe; no more no less. We also took into consideration the impact of TRAIN and how new BIR regulations are going to affect workers. It’s still a bit complicated but the past few years some things have cleared up.

You must pay taxes. But there’s no law that says you gotta leave a tip.– Morgan Stanley advertisement

Getting your Taxpayer Identification Number (TIN)

The first step to registering as an online worker is getting your tax identification number or TIN. If you already have a TIN, you’re good to go! You don’t need to get a new one.

If you don’t have a TIN yet, you can easily get one through the BIR e-registration system. Once you secure your TIN, you need to pay a Registration Fee of P500 to Authorized Agent Banks (AABs) within your tax area. You can also pay through the following BIR-accredited payment facilities:

For the purpose of this blog post, we’re going to focus national taxation (taxes you have to pay to the BIR). Different local government units might have their own taxation systems and rates which we will not discuss here. We also won’t be talking about how to register with the DTI because there are a lot of resources online you can use for that.

Forms, Forms, Forms

The hardest thing in the world to understand is the income tax. –Albert Einstein

The first thing you need to do is get ae BIR Certificate of Registration also known as Form 1901

The upper portion of page 1 of the form is where you would put your name and newly minted tax identification numbers (TIN). We used a fictional worker, Jose, as an example.

Under the TRAIN law, as an online worker you actually have two options on how to pay your taxes. You can pay the graduated income tax, which allows you to make deductions BUT you have to pay a quarterly percentage tax. OR you can pay 8% tax of your gross sales and you don’t need to pay a percentage tax.

Since Jose earns exclusively through his online job, he declares himself as ‘self-employed’ or as an independent contractor. In this case, Jose declares that he opts for the graduated income tax. If he chose the 8% gross tax, he doesn’t need to check the percentage tax. And when he renews his COR next year, he would have the option to change to 8% if he wishes. But for now, he is choosing the graduated income tax.

A Cash Receipt Book is a book where you record all the receipts that have been issued. All transactions over P25 must have a receipt.

A Cash Disbursement Book is where you record all your expenses in the business.

This might seem like an unnecessary hurdle but there’s actually a very good reason for this. This requirement is the BIR’s way of forcing people to get into the habit of record keeping. But if you prefer to submit Excel records instead, you can actually do so. There’s a separate form for it that you can inquire from your RDO.

Before the train law, there are exemptions for married couples and children. But under the new TRAIN law, there’s no need to declare these exemptions anymore. Now all they need to do is to pay for this Certificate of Registration (COR), by filling out BIR form 0605 (a.k.a. Payment Form) in triplicate to pay for it. The COR costs P500. This COR needs to be renewed every January.

The Payment Form (Form 0605)

Filipinos who are used to paying their own taxes will be familiar with form 0605 because it’s the form you have to fill out to pay for almost every kind of tax. Basically it’s like an invoice from the BIR that you have to fill out yourself.

Below is how to fill out the 0605 for the COR.

Since he using the 0605 to pay for her COR, he only has to fill out the fields below.

As you can see, Jose he’ll be using this form again in the following months to pay for percentage and income taxes.

After submitting the documents and forms listed above, Jose will have to attend a seminar conducted by the BIR examiner in order to get his COR. The seminar usually lasts from 1 to 2 hours. After the seminar, the BIR examiner will give them the date when they can claim their COR.

To be safe, Jose brought his book of accounts to the seminar so he could register it. A book of accounts is used to document business expenses and earnings. He needs to register a new book for every fiscal year.

Once Jose receives his COR, he’ll bring a photocopy of the COR and form 0605 he filled out to pay for his COR to a BIR accredited printing press to have his receipts printed. (The local BIR branches have this list. You just have to ask for it). The printing press will give Jose 12 booklets (each containing 100 receipts) which will last him 5 years. On average, a printing press will charge between P1,000 to P1,500 for 12 booklets.

Let’s Talk About Taxes, Baby!

Before we dive deeper into taxes, I need to put in another disclaimer here.

Local taxes are different from BIR taxes. Local taxes stay with your LGU and the taxes you pay with the BIR goes to the national government. To know more about the local taxes you need to pay (or don’t need to pay), it’s best to ask your LGU.

Let’s congratulate Jose now that he’s a registered taxpayer. This is where the TRAIN law would make the most impact as taxpayers. If he earns less than P250,000 per year, it’s basically tax free. No need to compute for exemptions. As long as you earn P20,000 or less, it’s tax exempt. BUT you would still need to file through the eFPS to declare it AND to get an ITR.

Now what would happen if you earn more than P250,000 per year. What if Jose earns P30,000 a month?

If Jose opts for the 8% tax on gross receipts and he has an income of P30,000 per month, here’s how much he needs to pay per quarter:

P30,000 * 12 months = P360,000

P360,000 – P250,000 (non-taxable income) = P110,000 (taxable income)

P110,000 * 8% = P8,800 tax due for the year

P8,800 / 4 = P2,200 tax per quarter

Graduated Income Tax

Since Jose opted for the graduated income tax, he will need to pay quarterly income tax and the quarterly percentage tax

Percentage tax = P360,000 (yearly income) * 3%

= P10,800 percentage tax for the whole year

P10,800/4 = P2,700 percentage tax

For his income tax, we need to compute for his taxable income first by subtracting his deductions. He can have itemized deductions (his business expenses) and the optional standard deductions of 40%. (We won’t be discussing how to itemize your discussion here because its beyond our scope. For more information about this, best consult an accountant or bookkeeper).

Itemized Deductions

Jose can choose to declare itemized deductibles. This can be cumbersome and requires you to keep receipts, so it’s best to consult with a bookkeeper/accountant if you decide to itemize. However, if you have a lot of deductibles, you can end up saving money using this option. Below are examples of Jose’s itemized deductibles:

Since this is Jose’s 1st time paying taxes as a self employed individual, he can declare the expenses he incurred during registration. That’s P1,500 for the receipts, P500 for the annual registration, and let’s say P1,000 for the NSO certificates, forms, and registration books.

His SSS, Philhealth and Pag-ibig for that month. Let’s say he is paying P500 per month for SSS, Philhealth and Pag-ibig, each

Whatever expenses he incurred in order to do his job. This includes his internet expenses. Let’s say he monthly internet bill is P1,500. He uses it mainly for work but shares it with his family. He estimates that 2/3 of his monthly internet usage is for work, so that is P1,000 per month.

And let’s say that for electricity and the depreciating value of his computer he declares a cost of P500 per month. So for 1 quarter, that’s P1,500/month.

When we total Jose’s itemized deductibles for the year, we reach a total of P51,000. We deduct this from his year income of P300,000

P360,000 – P51,000 = P309,000

Since his taxable income is beyond the P250,000, we’ll need to compute for his taxes using the tax calendar below

P309,000 – P250,000 = P59,000 (taxable income)

P59,000 * 20% (tax rate) = P11,800 (yearly tax)

P11,800/4 = P2,950 tax due per quarter

Optional Standard Deduction

Now let’s use the OSD as Jose’s deductible from his estimated years income, which is 40% of his gross income.

Jose’s yearly income – Jose’s OSD = Jose’s taxable income

P 360,000 — P 144,000 = P 216,000

Since Jose’s yearly taxable income is P 216,000, which is below the P250,000 mark, this means by using OSD he will exempt from paying income tax.

And to pay this every quarter, he has to fill up and file BIR form 1701q

And of course, he as to fill out a 0605 to pay for his quarterly tax. At the bottom of that table, he’ll put the amount and sign the form.

They’ll have to do this process 3 times a year. For the 4th quarter, they’ll be filing for yearly income tax which he will pay May the following year.

I know what you’re thinking, 8% is waaaay lower than 20% initial tax rate after P250,000. But the graduated income tax is more convenient to compute…. and it’s automatically set unless you register and declare that you wish to pay 8% on your gross sales. But there’s a limit. Once you cross the That’s why it’s important to register and declare early on.

Who’s Afraid of the Big Bad (Annual Income) Tax?

Let’s say it’s now the following year and Jose has to pay his annual income tax. Here’s when the computation changes since the tax computation is now based on the yearly income. Since we already know that his yearly tax (using 8% tax) is P8,800 and he already paid in the past 3 quarters P2,200 per quarter, he just needs to pay P2,200.

Compared to the 1701q, the 1701 is longer and much more complicated so we won’t show a sample of Jose’s form here. Suffice to say that regardless of whether Jose chooses to take the itemized deduction or the standard optional deduction, he will need an accountant or bookkeeper to help fill out the form since the 1701 requires the signature of an accredited tax agent.

Tax Payment and Filing E- Update

Turns out that BIR now has an online filing and payment system. Once you have your COR, you can register here: BIR Electronic Filing and Payment System. Once your registration is approved, you have to go to your RDO to have it activated. Once you have an active account, you should be able to input your information in the appropriate forms and it also automatically computes for you. I’m in the process of having this done. Will provide more information on how it works as soon as I’m done with the registration itself. Thank you Mommy Azalea for the tip!

Here We Go Again! (COR Renewal)

Every year, Jose will need to register again as an independent contractor/ self-employed worker. Luckily this time he would need just one form for this– the 0605.

No need to re-fill another 1901. They just need to bring COR, 0605, and receipt to renew their tax payer status with the BIR.

Model Filipino Online Worker is a Tax Payer

And as you can see, paying taxes doesn’t have to be expensive.

It is a tedious, cumbersome, and at time complicated, but once you have everything in place, the process becomes easier. And with this guide, we hope we’ve helped demystify the process of registering, filing, and paying taxes as an online worker. If you don’t want to handle your taxes by yourself, you can always hire an accountant, bookkeeper, on retainer to do the bookkeeping for you.

Model citizens pay their taxes and there’s no reason why online workers can’t be model citizens too. Paying taxes allows us to do our share in helping to make our country a better place. Paying taxes also gives us the right to give corrupt politicians the finger the next time they spend OUR taxes.

According to our consultation with the accountant, it would depend on your city’s local business ordinances. Some cities would require a business permit from the local government while some only require a barangay registration of micro-business. It would be best to consult with your local BIR certified accountant for more information on local ordinances.

Hi, I’m an online teacher and I want to travel abroad. One of the things they ask is my ITR but I don’t know where to start. Because of this post I have an idea of what to do thought the company that I work for already deduct tax from my salary but they don’t provide an ITR. However, they give us Form 2307 which has the breakdown of the tax that I already paid. So now, I don’t know where to start.

HI! I have read from your comment that monthly percentage tax can be deducted from income tax. May I ask how ? Because aside from the 10% tax that is automatically deducted from my salary (through online job), I also pay 3% of my gross income from my net income. Please guide me. I am bit confused. Thanks!

Hello! Thank you so much for publishing this article. I think this is very helpful to a work-at-home professional. I just want to ask help regarding my case. I’m a full-time online ESL tutor and my company withholds 10% of my monthly earnings , and provides a copy of BIR 2307 (quarterly). According to my company, BIR classifies us as Professionals (though we’re not PRC-licensed teachers) and not as Business owners. Could you also show us the procedures from registration, to renewals (if there’s any), until the filing of annual ITR? There’s much confusion in filing our ITR and every tutor has different experiences regarding this. Some were required by BIR to get COR, and some were not. Thank you very much for your help! – Lory

You’re welcome Lori! I believe we were able to cover most of the information you are looking for here but I will update this article regularly as soon as we receive updates from the BIR. But as far as we know (based on what our accountant has told us) online workers who are not employed in a company are required to register for a COR. =)

viena, i am also a professional and i pay my own taxes and ive learned though the years how to do it but also made some mistakes i had to pay for, as in penalties, anyways… you must pay your monthly percentage tax (3% of gross income) and quarterly income tax and annual income tax. the 10% withheld tax can be used as money to pay for the annual or quarterly income tax.

I understand how you feel. To be completely honest, the process is a bit tedious because of all the paperwork.

Just think of this this way, you’ll need an ITR when applying for loans with banks, getting a credit card, or applying for visa if you want to go abroad. Filing and paying your taxes now will make it easier if you have plans to take out a loan or go abroad in the future.

It would be best to work with an accountant if you want to itemize your expenses. He/she would be able to advise you on what you can include, what you need to have those expenses included (usually receipts), and how to input them in your books.

Thank you for this very informative article. I’ve been looking for something like this ever since. It’s very helpful. I have a question though. I currently work as a full-time home-based online worker and has worked in an office setting before so my employer got to file my ITR, but when I shifted to home-based work I was not able to file my ITR because I was at a loss on how to go about it and to be frank was only earning a bare minimum. I don’t have a fixed income and there are times I only earn four-digit income in a month. My question is – isn’t there any exception for minimum wage earners? Also, since I haven’t filed my ITR for the past few years, and should I decide to file now, will I be prosecuted for tax evasion??

I hope you can shed some light to my inquiries. Also, I would like to meet up with fellow online workers here in person to personally go through the process of filing ITR. The gap in my ITR makes me scared to go to the BIR office for fear that I might be questioned and fined. Please help. Thanks a lot.

The first thing you should look into is where your TIN is registered. If you used to work in a place far from home, you may need to change your RDO first. In this case, you’ll need to change your RDO using form 1905. But if you’re based in NCR, you can do this online through their website. Its only after you have transferred your RDO to your current address before you can register.

Now, about your taxes. The rates do adjust according to income and if you check the tax tables, if you earn under P10,000 you can be exempted from taxes. And if you don’t have income for a month or a quarter, you can declare a certificate of no income.

As for being prosecuted for tax evasion, it’s not likely. From what our accountant has told us, it’s more important for the BIR right now to encourage people to file and pay for taxes than to prosecute small taxpayers.

Thank you so much for this very helpful information. Will the BIR able to determine how much you are earning in a monthly basis or this depends on how much you declare? Also what if I can only present 3 receipts for just this year, will that suffice? Also, since I am only registering now, will they also ask me to pay those previous years since I started doing online work?

Will the BIR able to determine how much you are earning in a monthly basis or this depends on how much you declare?
It will depend on how much you declare, through your receipts.

Also what if I can only present 3 receipts for just this year, will that suffice?
Yes. For example, if there are months that you have no income, you have to declare that. You can ask a BIR accredited accountant for information on how to do that.

Also, since I am only registering now, will they also ask me to pay those previous years since I started doing online work?
According to our accountant, if you want to declare your previous earning, you will have to pay taxes for them. But for the best advice for your circumstances, please consult a BIR accredited accountant

Hi Julia! First of all, thanks for this very useful & informative article. I’ve got a question. In some cases you are advising to consult a BIR accredited accountant. Where can we find them? If we consult them, will they charge us consultation fee? Hoping to receive an answer, thanks!

You still need to issue receipts as proof of income. Dun i-base yung income mo sa kung ano ang nakalagaw sa resibo. You don’t need to send the receipt but do need to issue receipts for any transcation above P25.

I love your blog, very informative and easy to follow! Now I can start planning about paying my taxes. Although, I have a question if how much po ba ang charge sa pag-avail ng services ng bookkeeper or accountant?

Bookkeeper/accountant services would depend on where you are and who you know. Based on our research, a bookkeeper on retainer can cost between 1k-2k per month. An accountant would cost more on retainer. Hiring them for one time jobs would depend on the kind of work you need them to do (organizing your books, computing, etc).

thanks so much for this! so informative and helpful 😀
i went to RDO 53B earlier and when i was going to submit 1901, the lady told me that i need to submit a contract/certificate to prove that i am indeed working online/freelancing. and she did not ask for any IDs/birth certificate etc (reason she cited: i already have a TIN). she told me that all i needed to show/submit was the contract + 1901.

Yes, in a way it also depends on the office. Our accountant admits na now all RDOs (even BIR workers) are aware of the new rules and don’t implement them consistently. But I think the certificate she is referring to is the certificate from your barangay. Parang micr-business registration. Just a certification from your barangay captain that you work from home/home-based worker.

hello again. i submitted the printed email that my “employer” sent me (stating that i am “hired” and will work online/home-based, and how much i’m getting paid monthly) and the BIR officer accepted it. i now have my 2303 and receipts but unfortunately, they misspelled my family name on the certificates (thank goodness the spelling’s correct on the printed receipts)!

i have another question as this will be my 1st time paying the monthly percentage tax, this might sound silly hehe. when paying the monthly percentage tax (or even the monthly and annual income taxes), do i have to go to my RDO? or do i just pay at the accredited bank and that’s it? thanks again

Ibang usapan naman yan. If you choose to declare that income, your taxes could change coz they will add that to your income from your job. In this case, it would be best to consult with an accountant or bookkeeper because that added income will affect how you file and pay your taxes.

Thanks for all these information. The example though is if you’re getting a fixed amount of pay every month. Is the computation the same way if you get different amount on a monthly basis? I am an online worker and never get the same amount of pay every month. So this is confusing for me. Thanks for your help!

If your income changes month per month then your monthly percentage tax would change per month and quarterly income tax would also vary. The same computations still apply (3% gross for monthly percentage, the tax table for quarterly), even with the changing income, but you just need to make sure you keep track of how much you earn to make sure.

And if there are months that you have no income, you have to get a form from the BIR to declare that you didn’t have income for that month. You’ll need this to exempt you from payments. This is very important because failure to declare non-income will result in penalties.

Thanks for this very helpful guide! I have a question since I’m working online and I’m earning dollars but diff each month, meaning every when paying quarter tax vary on the salary you earn in a certain month? same computation applies..thus this mean i’m exempted in paying the 3% in paying VAT/percentage tax? since amount paid is dollar then deposit to my account is already converted into peso which apply which is the actual rate of exchange dollar to peso..

Also since my client is not releasing invoice for the proof of payment/salary of mine so can release a receipt of payment? I mean pwede ba ako mismo ang mag release ng recibo stating my paid salary.. please help me with this.. let me know..

You’re welcome! Now, about your questions…I have a question since I’m working online and I’m earning dollars but diff each month, meaning every when paying quarter tax vary on the salary you earn in a certain month? Yes, your quarterly tax would vary if you’re earning different amounts every month.

same computation applies..thus this mean i’m exempted in paying the 3% in paying VAT/percentage tax? Percentage tax is not VAT, it’s a business tax. But it would be best to ask your accountant or bookkeeper on whether you are exempted from this tax. But on our consultation, online workers are covered under that tax.

Also since my client is not releasing invoice for the proof of payment/salary of mine so can release a receipt of payment? I mean pwede ba ako mismo ang mag release ng recibo stating my paid salary.. Yes, you can release your own receipt stating your own salary.

Hope my answers helped. But for the best advice that would suit your case, please consult an accountant or bookkeeper.

also Quarterly Income Tax due is Due Date: April 15 (2014), Aug 15(2014), and Nov 15(2014) and Yearly and Final Quarter Payment of Income Tax Due Date: April 15 the following year.

Question: Example I already paid Quarterly tax , April 15 (2014), Aug 15(2014), and Nov 15(2014) on this date so by the the following year(2015) I will pay the Annual tax which is also Due in April 15 (2015)so thus this means the following year(2015) I will pay twice “the Annual tax(2015) + the 1st quarterly tax of 2015 “? let me know.. thanks

Hi Julia,
This blog is the most friendly and very informative one I’ve encountered (FINALLY!!!)

I am also a bit confused of this process

I WANT to be good citizen for my country and I WANT to pay my tax properly.
Problem is, I don’t know how. so I researched a LOT but i really find it very complicated and so confusing because there are TONS of forms from BIR (and oh! # of pages too). it’s overwhelming. I think this is one reason why other people would give up even if they really want to RFP haha. (I almost..) good thing that I’ve encountered this BLOG before reaching my limited patience. I’m on the verge of giving up. 😀

I was a regular employee for 5 years and my employer did everything for me.Also the registration of my TIN was technically done by them. I only receive my ITR readily available for me. I was issued with TIN no. and ID card (I must thank them!!).
But I changed my job now. i currently work as job contract employee (or self-employed category). This company issues 2307 when request is made.
I need an ITR so I asked them to give me but they said i should file it to BIR myself.

At first, i was a bit shocked because it seems i am disoriented. but I did my random research and found out that I SHOULD file before the deadlinesssss.
How can do it when i only found out about this in the middle of the year?
a. will i be penalized for not beating the deadline?
b. can i still file for 1701Q1 (even if it’s already 1701Q2 filing now)
c. if i have to do some process such as changing registration from employee to self-employed and cannot beat the Aug 15 deadline for 1701Q2, what would happen?
d. Can i just file 1701 directly without filing 1701Qs?

Please help me on this.
I really wanna RFP right taxes and hopefully this won’t be taken against me by BIR if i was not able to comply in the past due to lack of info dissemination.

Thank you in advance Ms. Julia!:) God bless you and your career!
Pines

I’m glad my post was helpful. I’ll try to answer your questions the best thta I can but it would be best to consult with an accountant or bookkeeper so you’ll have solutions specific to your situation

How can do it when i only found out about this in the middle of the year?
a. will i be penalized for not beating the deadline? As far as I know, di naman. Sayang lang co the registration fee is for an entire year. regardless of whether you pay sa January or August, it’s the same price so mas sulit na magpa-register as independent contractor ng January.
b. can i still file for 1701Q1 (even if it’s already 1701Q2 filing now). It’s your prerogative. But I strongly recommend you consult an accountant for this as there might be some penalties involved.
c. if i have to do some process such as changing registration from employee to self-employed and cannot beat the Aug 15 deadline for 1701Q2, what would happen? as far as I know, wala naman penalty.
d. Can i just file 1701 directly without filing 1701Qs? Yes, pwede direct.

also bit confuse on section above stating that government owe Jose of 700php bit not clear can you site an example which it will deduct to your quarterly payment?
I mean minus the 700.. Thanks.. in this point I get confuse =) Thanks.. please

First, let’s put this in context muna. Let’s say the P700 is Jose’s excess tax in 2015. He can deduct in the following year either in one of his quarterly payments or in the 2016 annual income tax.

Now, for most of the blog post, I presented one way to compute for Jose’s taxes. A computation that resulted in P700 excess at the end of the year. But I also presented another way to compute for Jose’s taxes. A computation that would not result in excess payment.

In this alternate computation, Jose deducts his monthly percentage taxes from his quarterly income taxes, so he only pays P400 per quarter instead P1,300. In this case, he pays less in each quarter BUT he has to pay an annual income tax of P1,100.

To summarize
Scenario 1: Jose pays a higher quarterly income tax and pays in excess of P700 that he can deduct for the next year.
Scenario 2: Jose pays a low quarterly income but he has to pay P1,100 at the end of the year as his annual income tax.

These 2 scenarios represent the different ways you can compute for your taxes to make it easier for you to pay. Some people prefer to pay higher taxes per month if it means not having to pay an annual income tax (you still need to file it to make the excess valid). While some prefer to pay lower monthly and quarterly taxes per month even if it means they have to pay a bit more at the end of the year.

How you compute for your taxes would depend on your circumstances, which is why we often say that you need to consult a bookkeeper. I remember you mention that your salary would vary every month. And in that case, to get the best computation, you would need to consult one. What we present here is just an example with a very rigid circumstances and the computation is just to help you understand the process. For best results, please consult a tax professional.

Glad the blog post helped. About the exemption from 3% percentage tax, I’m sorry but I don’t know the answer to that. The person who can best answer that would be your accountant or bookkeeper. He or she would be the person best qualified to tell you if you are exempted from paying percentage tax or not.

Thanks Julia. Do you have an idea if we can pay just once a year? If so,how can we compute if we just pay every April 15th?

Also, if the quarterly starts on April 15th, are we still paying for the monthly? So it’ll be monthly tax + quarterly tax?

And for the quarterly tax + the annual tax? Since they are on the same date?
I’m sorry, these questions are bugging me. I just wanted to make sure I know something before going to the BIR. As we know, some officers are different from others.

Thank you for this article, I have registered last July and I’m still a bit confused about some areas and this helped me. Anyway, would you mind adding a tutorial for the books of account or ledger? Just I still find that part confusing. Thanks!

As for hiring an accountant, you can go to the Philippine Institute of Certified Public Accountants. They have local chapters all over the Philippines. There you can ask for a list of accountants that they can recommend.

I started working in an online company last 2013 and found out just this year na I need to pay taxes. In short d po ako naka file ng ITR last April 2015. However, may full time job I was hired last June , 2014. Moreover, my online company only issues 2307 withholding us 10% of our total income.

So i went to the BIR sa lugar namin and the BIR officer said na forget the Year 2013 and apply for a COR this year and declare a mixed income. They also required me to change my Tin from my current RDO tin to a different place where I do my online business.

The example is presented in the article is that of an independent contractor. The online employer does not withhold any income tax, which is why the example I presented had to register, file, and pay monthly percentage taxes and income taxes.

To be completely honest, I’m a little confused by your story. You have an online job and a full-time job?
Online job started 2013 and full-time job 2014?

If that’s the case, your tax situation would be more complicated and I strongly recommend you consult with an accountant or bookkeeper for this case.

Im a bit confuse though in the Annual Income Tax computation. Since your example falls on the 10,000-30,000 bracket, shouldn’t the 27,000 be deducted by 10,000? Since in the tax table it says 500+ 10% of the excess of 10,000?

So it should be P500 + (10% * P17,000) = P2,200? Maybe im just confused with all these numbers. hehe

Thanks for making this site forum available for everyone especially for self-employed like me too. I just have a few questions and they are numbered in order not to confuse you. Thanks for the response in advance.

1. I`m a homebased English Teacher (Independent Contractor) and have just registered as Self-employed professional at BIR. My COR was released/stamped on March 3, 2015 (Temporary cert). Such date was the “ink stamp” one just above the Documentary Stamp. However, there was also statement below the trade name and tax type ” *** ONETT: 09/06/2014 Business Registration; 02/18/2015 ” . They accepted my papers on 02/18/2015 so maybe it is the registration date? When should I pay the Percentage tax then, 20th day of the month following March 3,2015 or following Feb. 18, 2015?

2. I am now using the offline e-BIR form because I heard that AABanks don`t accept the manually printed form anymore. Below are the list of deductibles in OSD option of 1701Q (e-form), SHOULD I fill out the 38C, 38E, and 38G at the same time? I am receiving 2307 from the company so I just filled out 38G but filling out the other two seem redundant.

I’ll try to answer what I can but I would recommend it would be best if you consult with a bookkeeper.

1) When should I pay the Percentage tax then, 20th day of the month following March 3,2015 or following Feb. 18, 2015? It would depend on when you start earning (when you started issuing your receipts). The amount and date of your receipts is where you will base your monthly percentage tax.

38G/H Creditable Tax Withheld per BIR Form 2307 for this Quarter 38G 38H
38I/J Tax Paid in Return Previously Filed, if this is an Amended Return 38I 38J – consult with the company that provided your 2307

hello julia.. my boss has a due payment on nov.15 2015 for quarterly income tax.. but it is sunday.. so i should pay on the 16 of this month nov.2015 but i forgot to pay.. do i have any penalties now if i will pay on the 17th of nov. 2015..?

I have questions sis, pls help me…
I already have TIN since 2000 pa, when i was an employee, but stopped working for very long years, only on year 2009 when i started my freelance online work in oDesk.
Then only this coming year I have decided to register as self-employed professional…

Questions:
1. Since I already have TIN (but no issued TIN card), can I pay first the 500pesos registration fee at BIR accredited agent bank before going to my RDO and file the requirements, and file BIR Form 1905 for registration information update ( from employee-to self-employed professional)? Pls I need your response… your response will greatly help me…..

Yes, you can already register BUT you have to double check with the BIR where your RDO is (regional district office). The RDO is the place where you registered your TIN and your taxes would filed/paid. If you’re going to register as a self-employed individual, you might be asked to transfer your RDO (from your old office to where you will be working). If that is the case, you may need to request a transfer of RDO.

Nagsearch ako ulit and eto yung nakita ko “if you choose to not register a trade name and only choose to use your name as the registered name, you don’t need to submit DTI certificate”. So I think di ko na kelangan ng Mayor’s permit and DTI. Nakita ko rin sa 1901 form ko na yung business name na nakalagay is yung full name ko.

I wonder though kung OK lang mag-declare ng income without proof of receipt? Let’s say I am issuing receipts this year pero last year wala akong na-issue na receipts kasi hindi naman na-require ng client. Can I just come up with a figure dun sa forms ko?

This coming April 15 will be the first time I will pay my quarterly income tax (I just started working this month) and I am still cannot quite comprehend just how to go about paying my tax as a self-employed individual, that is, until I stumbled upon this very informative article of yours. Thank you very much for posting this the examples given really made it easy to understand. haylabyu po :* hahahaha

This coming April 15, will be my first time ever to pay for any sort of income tax (I just started working this month) and I still cannot quite comprehend just how to go about paying my taxes as a self-employed individual, that is, until I stumbled upon this very informative article of yours. Thank you very much for posting this! The examples given really made it easy to understand. haylabyu po :* hahahaha

I’ve been working from home now and I file my own income tax. However, I have never received any tax refund. How do I get this back? When I was working for a conventional office, the company would give it to us automatically. Your help would be greatly appreciated. Thanks in advance!

According to our accountant, it’s possible to get a refund but difficult. Especially if you’re filing as a sole proprietor and the refund isn’t that much. The more practical course is just to have your excess payment deducted in your next payment. But if you really want to get a refund, I strongly suggest you ask for advice from an accountant or the BIR for this.

If you are a regular employee, you shouldn’t have a problem. As an employee one of your company benefits would be to have your company withhold and pay your taxes for you. And the proof of this would be your ITR.

But if your company does not do this for you, then under Philippine law, you are considered an independent contractor and you would have to register, file, and pay taxes as I described in the article.

Hi! Thank you so much for this article!! I have the same scenario as Raf. Is it legal to use OSD in our tax computation? I would just like to clarify because as a regular employee, we don’t have actual clients and we don’t issue OR. Should we just make receipts to comply with BIR requirements?
Thanks in advanced!

Hello. Thanks for this guide. Guess what, we already had our Certificate of Registration last month (and we are still processing our receipts). Indeed, BIR offices have different set of requirements. In fact, in our place, we are required to pay for a Professional Tax Receipt (PTR) for P300. However, there was one time when my friend was asked with a Mayor’s Permit… but as advised by one of the BIR employee, we processed his application the following day, and everything went well…

Julia, can you help us? We don’t know how to put entries in our book of accounts. We are asked with only 2 book of accounts: a ledger and a columnar. We are totally clueless as to how we are going to record the salary we got in the book of accounts. Please please help us… Feb 20 is almost running near…

It would depend on your arrangement with your accountant. Based on our research here in Davao, it would cost around P1k – P3k per month. But you could haggle, like only hire them to process your papers or only during your annual filing, etc.

If your questions is regarding hiring accountants/bookkeeper, you can hire them on retainer (pay them every month) to do everything for you. If you can’t, you have the option of only hiring them once a year to help you with your annual income tax.

If your company already withholds tax, you don’t need to pay percentage tax, quarterly, etc. You do have the option of filing your taxes once you receive form 2316 from your employer. You don’t need to pay any extra, just file it.

I’ve been doing freelance work since 2008 and i never filed a single ITR.tsktsk. not that i intentionally avoided paying taxes but i was just not aware of the process. i actually thought im free of any tax liabilities since most of companies that i work with deduct around 11% from my salary for tax.recently i registered my business and thats when i realized i should actually pay around 30-32% annually. Now, i have to apply for a Schengen visa and one of the requirements is the ITR.is it ok if i pay for this years ITR only? will they see on their records that i have tax liabilities and require me to pay everything .This is just really stressing me right now. accounting freelance work will be hard, but to account all the transactions since 2008 will be a nightmare. and i just cant afford to pay them. I also needed to submit latest itr next month but i read that filing is still on april. can i go to bir and file even if its not april yet. i dont know how it works.

Thanks so much for this article! I’ve been reading about freelance tax for a long time and I always get turned off once it becomes uber complicated. Your step by step process and especially your examples with exact figures are a big help! Thanks again and God bless

I’m just wondering ma’am if you have an idea about the BMBE Act (Barangay Micro Business Enterprise Act) that exempts registered micro business owners for the income tax, and as a, considerably, business owners, can online workers maximize this law?

And do you have an idea on how to file this incentives for income tax exemption?

hello.. thanks for all the information i have learned. basing on the computations from this website, i have also tried to use a higher figure. I used 30,000. (this is not my salary but i just want to make a different scenario not so far from experience) As an online teacher, i don’t know exactly how much i will receive the next month due to delayed payments, and withdrawal of students (others don’t continue to study anymore. Don’t know if it matters but i have no employer. My students pay me directly.) Let’s say I opted for OSD. so 90000- 36000 = 54000 (quarterly income- OSD= taxable income). My category is 30,000 but not over 70,000. Basing on the formula- P 2500 + 15%( 54,000 – 30,000 ) = P6100. So i need to pay this amount quarterly. Am i right?

Now for my Annual Income Tax, i am going to follow the formula again.
I am single and no dependent so i am only entitled to a P50,000 deduction from my gross income yearly. So let’s say i earn 360,000 a year (basing on 30,000 a month) minus 50,000 is 310,000. Take away again the 40% OSD (124,000) so my taxable income is 186,000. This part, i am not sure if i am doing it correctly. I am under 140,000 – 250,000. so P22500 + (25% * (P186,000 – P140,000)) = P34,000. and since Iv’e paid for the past 3 quarters, P18,300, my annual income tax is P15,700. Is my calculation correct?

I hope to read a reply from you soon. I desire to pay my tax accordingly and so i am eagerly learning. Thank you very much.

Does this mean pwede mo rin skip lahat, monthly and quarterly, and only pay yearly? – Yes, you have the option of doing this.

And bakit “easier on the pocket” pag nag bayad ka ng monthly/quarterly/yearly instead of just yearly? – Think of quarterly payments as “installment” payments on your tax. The tax you pay every quarter ultimately adds up to your annual income tax. If you pay just once a year, you’re paying a lump sum. If you pay per quarter, you pay tingi-tingi.

Also to follow up on my previous comment,
I managed to ask an accountant i found online and he/she can process my ITR 2316 and gave me the amount I need to pay for taxes, how is this different with the forms mentioned above?

I’m currently working for a company(home based full time) based in Sydney, Australia.

Hello! I have been a freelancer since 2012 and I am now planning to register as a taxpayer. Say, I plan to declare my earnings since 2012, which specific taxes do I have to pay? The percentage tax, quarterly ITR or annual ITR? Kase based sa understanding ko, dine-deduct din naman yung pecentage tax at quarterly ITR dun sa ITR, tama ba?

I know late registration or filing is subject to penalties so before pursuing my registration, gusto ko muna sanang i-compute how much tax, I need to pay. Thanks.

Also to add: Personal deductions are actually deducted AFTER deducting the OSD.

So using your example above, the annual income was 120,000, after OSD the taxable income becomes 120,000-(.4 x 120,000) = 72,000.

Then you can apply the personal deductions, so: 72,000 – 75,000 = -3,000. Further applying the quarterly taxes you already paid, then that becomes: -3,000 – 3,900 = -6,900. Even considering Percentage Taxes are already integrated in the OSD, BIR actually owes Jose so much more in credits

I stand corrected: since the personal deduction of 75,000 is bigger than the taxable income of 72,000, then the tax due would actually be 0, not -3,000. But the 3,900 that you’ve still paid can applied for as tax credit. Sorry if I had a lot of comments, I couldn’t find an edit button for above.

Not sure why my inquiry did not post.. I would want to know how to fill out the 1700 eform, was told of a bir rep that what is in my 2316 is what i need to put in the form. but im not sure which info is which – not even the job aid help cause it would only state “if applicable”.

Hi, good evening. I would like to ask regarding my TIN. I used to work in Manila specifically in Imus, Cavite. I applied/registered my TIN there but now I am residing in Iloilo City and working as an online tutor. I wanna ask if I need to transfer my registration of my TIN from Cavite to Iloilo?

Hi, good evening. I would like to ask regarding my TIN. I used to work in Manila specifically in Imus, Cavite. I applied/registered my TIN there and worked in a hospital so I am considered as an employee. But now I am residing in Iloilo City and working as an online tutor. I wanna ask if I need to transfer my registration of my TIN from Cavite to Iloilo? And do i need to change my category from an employee to individual contractor? And what steps do i need to follow for the application?

Your TIN – you will need to request for a change your RDO (regional district office). Our TINs are registered usually where we first find employment or where we first register. Since you initially worked in Cavite and moved to Iloilo, you’ll need to go to the Iloilo RDO and ask for their help in the transfer.

Category – Yes, you would need to register as an independent contractor. I provided instructions on it in the blog post =)

Hi, Julia! This is a very helpful article. Thanks a lot! I’m a little confused regarding receipts, though. Is this something I can obtain from the BIR as well? All I can present as proof of income are a bank statement and the payments I received posted on my account through oDesk, if you’ve heard of it.

Also, on one of the comments, you mentioned that it’s dependent on what is declared. What if I earn, say, 30K per month solely through online freelancing. Is it possible to put a cap on that when I declare my monthly income? Can I declare only 20K on the receipts? And if what I earn is in dollars, will I need to convert it to PHP when filing taxes? Would the daily fluctuation in currency conversions affect it?

I’ll try to answer your questions the best that I can. But if you need more information, I strongly suggest you also consult with a bookkeeper or accountant. They’re the experts =)

I’m a little confused regarding receipts, though. Is this something I can obtain from the BIR as well? – No. What the BIR provides is the permission for you to have receipts printed. What’s different from receipts printed from BIR accredited printers and receipts we just print ourseleves is that the BIR will recognize what you put on the accredited receipts as your proof of income.

What if I earn, say, 30K per month solely through online freelancing. Is it possible to put a cap on that when I declare my monthly income? – Yes

Can I declare only 20K on the receipts? – Yes

And if what I earn is in dollars, will I need to convert it to PHP when filing taxes? – Yes

Would the daily fluctuation in currency conversions affect it? I don’t think so. The BIR only looks at what is declared in your receipts and books, which is declared in pesos.

thank you for this very informative article!
I have a question though, I have been working with an online English company. They asked me to pay 1,500 bond which is refundable if I resign after a year. So if I wasn’t able to complete a year with them, they will ot return the bond.

Due to some reasons and other problems with this company, I decided to resign. I completed paying the said bond. But they wont give me my salary completely. they told me I would get only half of it. Will I have a stand against this company?

I’m glad you found it helpful. Yes, you still need a cash disbursement book. Even if you opt for the 40% deductible, you still need to list the expenses you incurred with your registration, buying your receipts, your month percentage tax, quarterly income tax etc. This is important because you can add them to your deductibles.

If you need a more detailed (and more accurate answer) it would be best to consult your bookkeeper or accountant.

I really want to register soon but there’s only one thing that really concerns me (which is really discouraging) is about the “even you choose the standard optional deduction you still need an accountant or bookkeeper to help fill out the form”.. Or the whole bookkeeping thing in general. Since I’m so clueless about all this, is my only option would be hiring an accountant or bookkeeper? (which I don’t even know how) How does it work? I thought I could just do it all by myself but seems like not.
I’m really sorry for still being confused. If you could explain that part to me in details that would really be great. Thank you so much! God bless!

We often recommend that you still consult a bookkeeper or accountant because we are not tax experts. What we presented here in the article is just once scenario of an online worker. Things would change if your circumstances are different. You don’t need to hire a bookkeeper full-time but it would be best if you consult with one so they could advice you on the best way to deal with your taxes.

Hi mam this article is very impormative. I have a question when filing 1701 annual income tax. I’m using the eforms of bir I am confused if I will choose between compensation or business income. Since I was registered as a self employed professional and every quarter the company gave me 2307 for filing of 1701q and 2551m. I’m a little confused on how to fill up this since It was my first time. If ever there would be a refund, what is the process thank you very much and more power

Hi Julia, thanks for the info. I also have a question. I had 2 employers last year and I wasn’t able to submit/ process a 1905. My current employer already provided me a 2316 for 2014. Should I be worried with anything? Should i do anything? I’m afraid to ask anyone from hr since they might tell me that I have to pay a penalty. Thanks.

Thank you very much, you are very accommodating and generous to answer all the queries, it’s very helpful. I would like to ask for some help with regards to filing of 1701Q. Ever since, filing of my taxes has been handled by an accountant but the I decided that I want to handle it myself as to avoid open cases kc medyo napabayaan ng accountant ko. Kaya ako na ang personal na nagpa file. In my 2014 1701 (ITR) filing, i had a tax credit amounting to around 8k, if i file my 1701Q for the first quarter of 2015, do i need to put the amount on the portion where it says “38A/B Prior year’s excess credit”. Second question what is the supporting documents I need to attach to support my tax credit?do i need to xerox and attached my 2014 1701?

I’m glad you found this blog post helpful. I’ll try to answer your questions the best that I can but I strongly suggest that you still consult with an accountant or bookkeeper to get the best advice suited for your situation.

i had a tax credit amounting to around 8k, if i file my 1701Q for the first quarter of 2015, do i need to put the amount on the portion where it says “38A/B Prior year’s excess credit”.

Yes, you do. You’ll need to a photocopy and original copy of your 2014 1701.

I just want to share my experienced last week when filling my itr in RDO43a
Currently I am working as IT consultant classified by my company as individual payor,
and monthly they deducting us 10% . Upon filling my ITR-My company gave us 2307 and I ask a bookkeeper to compute my tax. Then I went to the BIR to file my ITR with 1701 form . they ask me to get a number and verify . Upon checking to the personnel at verification–>He check on my TIN and that that I am classified as under local employment. I said that I am now practicing a profession and then told if I process before a 1901 or change status. I never process any change of status or process any form-my service company also not told us to process or inform that it should be done. It was the 1st time, I used to be an employee before, so no idea or information to process that – we just assume and the only thing we know that we are are deducting tax by our service company. They told me that the company should file in behalf of me not mine and the company should give 2316 instead.

So I ask them what should I do, I was forwarded to the “Officer of the Day” to consult my issues…they ask me I should process change status to professional and requiring me to get a COR and a book. but since I am filling my ITR for 2014 it was late then and they said there’s a possiblities to be penalized because it has been 2 years that my status is that..last 2013, my service company filed on us but with same status but not even detailing the need of the COR or book. I present them the copy of my 1701 for 2013 tag as prof,.They said possibilities that last year it was overlooked and just received by the BIR or bank without verification.

So, I said there’s no need to get a book and register because starting this year I was already employed by a company. So, they just advised me not to change my status because it will be complicated since my curent is local employment so it’s just the transfer of RDO will do. So , in other words, they advised me not to file for 2014 and since I am not payable, rather, I am refund for an amount of money–the risk and sad to know that I’ll will be no longer refund the money. Well for me it’s ok not to refund, my only concern that my status will be corrected and no issues encounter on the future.
Since they said for this 2015 a new computing will apply on me under an employee.
I only abide on the law on filling but since this thing hassle me a week to process , I just follow the advised of BIR, since they know best of what I think. I appreciate also the BIR RDO 43a because they really scan all process checking on what’s going on my status, because my other colleague was able to pass their !&)! to othe RDO with ease, and they said no checking done on them, even in banks that only accepts payment w/o verification.

Thank you for sharing your story! This is really helpful and I’m glad your RDO has been really helpful. And yes, it is best that you followed their advice and it’s great that you also consulted a bookkeeper regarding your case.

According to our accountant, yes, you may have it deducted with your quarterly if you want. But it’s best to consult with a bookkeeper to make sure that you’re doing it correctly according to your circumstances.

But how about money earned from trading foreign stocks online (or forex, for that matter)? How is this computed? Should each trade be reported? This seems unreasonable and taxes would be way up there especially for day traders.

In this scenario, the trader resides in the Philippines, but the brokerage is in the US or another country. Nothing I’ve found in BIR circulars or even in our laws.

Do I need to go to DTI and city hall first if I choose to pay taxes as an independent contractor (use my name)? No plans of registering a business (sole proprietor), just wanted to know if I can go directly to BIR and follow steps in the blog.

We actually asked the DTI and they said that you don’t need to register with them if you just work from home or work as an independent contractor. But once set up your own office, you may need to register with the DTI.

I find this article very helpful indeed, but with the advent of online filing I wonder if you can put up a step-by-step instruction with pictures on how to go about it. I am a computer literate person but I do find it intimidating to go through the process of online filing. I think this will also benefit other freelancers out there.

I consulted with the accountant and he says that you start paying when you start earning. However, if there are months that you dont have income (for example, you didn’t earn anything in June) you have to declare that you didn’t have any income. Same with 1701q and 1701. But for the best answer, please consult your accountant. He/she would best understand your situation and give the most accurate response.

In this company I’m currently associated with, they said we are categorized as “self-employed, freelancing professional sharing your expertise with our company” , and I am being deducted 20% tax (10% every 15th and 30th of the month). I just wanted to clarify if this is valid or just. I’m totally confused on these charges and I am really in need for an enlightenment.

By the way, I’m currently out of the country and really have no other way to confirm this concern, hence, I’m leaving it all to your hands.

Freelancers or self employed professional pay their own taxes and as far as I know there shouldn’t be any deductions. But the best person to talk to about this would be your company’s HR or accounting. Clarify what these deductions are. They might be something else completely.

Re: insurance payment, please check with your accountant or bookkeeper. He or she would be the best person to answer that question.

Re: filled out form. The filled out form is actually posted on the article. But please note that the article only presents one very specific scenario of online workers and the example presented here shouldn’t be taken as an absolute guide for everyone. It would be best to consult with your accountant or bookkeeper if you want to accurately fill out your form with consideration to your circumstances.

I would like to ask if my computation is right and are there any options to lessen the tax burden? If you can email me then it would be great, I would like to talk to you more about tax rates and doing business., etc. If that’s okay for you, I don’t mind paying you hourly

Wow! Thank you for the offer. I’m glad that the article was helpful. But I think the best person to consult would be a bookkeeper or an accountant, especially with your high rate. He or she would know more of what deductibles you could qualify for =)

Hi, I work for a Singaporean company as a regular employee. I work remotely and I travel to Singapore from time to time to meet my boss and to other countries too. Now my question is, do I need to file for an ITR for myself? My friend called BIR sometime before the Apr 2015 deadline and they told her we don’t need to since we are not employed in the Philippines. I’m greatly confused. Help would be appreciated. Thanks!

This article mainly focuses on independent contractors or freelancers. In your case, you are employed with a Singaporean company which makes your situation different. It’s great that you consulted with the BIR on this since they would be the people who know best. If you’ve already explained to the BIR your work situation and they have said that you’re exempted then good for you! =)

Very informative. Thanks for sharing. I have a question for u though, 1) I wonder what is the use of the receipt? We’ve been documenting our expenses using book of account so im wondering kung saan gagamitin ung receipt.n anong ilalagay sa receipt? Will bir need that in the future? 2) Can we just pay the monthly n annual tax kc advance nmn ung pang quarterly para d na madami ang papers.hehe. 3) I wonder if u can also create process in paying taxes for small businesses like computer shop, same lng b? Thanks so much.

I’ll try to answer your questions the best that I can but it would be a lot better if you consult with an accountant or bookkeeper.

1) I wonder what is the use of the receipt? We’ve been documenting our expenses using book of account so im wondering kung saan gagamitin ung receipt.n anong ilalagay sa receipt? Will bir need that in the future?

The receipt is the basis of what you put in paper. Basically, everytime you earn money you should issue a receipt. And what’s on the receipt should be what’s in the book of accounts.

3) I wonder if u can also create process in paying taxes for small businesses like computer shop, same lng b?

Similar lang sila pero not completely the same. In the case of a computer shop, you probably have to pay rent for the space, register your business with the DTI, etc. When you have an actual shop, better if you have an accountant/bookkeeper to help you keep track.

I am not proud to say that I wasn’t able to pay my taxes in my previous company as a consultant and now I am transferring in a new company as a regular company. Are ITRs required when transferring to a new company? How will I process it and will I get penalties for the unpaid years? Thanks.

As far as we know (and based on the advice of our accountant), ITRs are not required when transferring to a new company. But it would be best to consult with an accountant for the best answer, since you previously worked as a consultant.

Ang tanong ko next is nag-file ba sya ng certificate of no income? Kasi kung registered ka pero di ka nakapagbayad ng percentage tax or any tax, you have to file that. Yes, you friend would have to pay penalties. As to how much, it would be best if he/she consult an accountant or bookkeeper for it to get more details.

Hi. Thank you for posting this! After days of both confusion and frustration, I finally found a simplified process for a tax dummy like me. I didn’t want to risk filing unless I understood clearly the process. I have one question, though. I was asked by BIR to obtain an OTR (Occupational Tax Receipt) from the City Hall. My job is purely online (as an ESL trainer) and I work for an average of 4 hrs. a day. Can I contest needing to get an OTR or is it really necessary? Also, how can I issue a receipt with my line of work?

Evens as an ESL trainer, you will need to issue an OTR. It’s covered for all professionals who are does not have a PRC license and yes, you will need your receipts when you file for taxes. If you check the blog post, part of the registration process would be having these receipts printed with an accredited printing press.

Now, how can you issue receipts to your clients since you work online. You don’t have to send them the actual receipts. You can just send them the electronic copies if they ask for it or just create the receipt and keep it for your own records. When you’re audited, the BIR will check your journal against your receipts, which is why if you want to declare your income and you want that income in your ledger, you have to write it in your receipts first then write it in your ledger.

Hi! Thank you for posting this. It has been both frustrating and confusing the past days as I was skeptical to file my taxes without clearly understanding the process I need to go through as a contractor (who relies on online job). Sadly, most people that I talked to in my line of work either doesn’t know the exact process or just did the registration and stopped right there. This is such a big help for tax dummies like me.

Just a few questions, though:

1.) My RDO asked me to obtain OTR (Occupational Tax Receipt) from the city hall. Going through the article, I did understand that there is a need for a Cash Receipt book and a Cash Deimbursement, as well. However, can I contest getting an OTR? I’ve read another blog that says an OTR is like a Mayor’s/Business permit and isn’t really necessary.

2.) In our line of work as individual contractors (self-employed), we don’t really get to issue receipts to our clients, especially in my case as an ESL tutor. So, do I just fill-in receipts every time I receive my compensation? Is it then solely for my earnings or is it also for expenses?

I find this blog the most credible since you were able to inquire closely with a registered BIR Accountant. Thanks.

I think I answered most of your questions in the previous comment. As to the OTR, yes you will need it and it is applicable. I haven’t been able to put this in the blog post because this process can vary from city to city. In some cities it’s easy to get and OTR and in some, not so much. So it’s best to check with your city hall on how to get your ITR. If they ask you what you do, just say independent contractor or sole proprietor. Most people aren’t familiar with online work yet so they might get confused.

So, do I just fill-in receipts every time I receive my compensation? – Yes
Is it then solely for my earnings or is it also for expenses? – Solely for earnings. But you should also fill in your expenses in the ledger, especially if you opt for itemized deductions. Also make sure you keep the receipts.

Sorry I can’t give better answers. The best person to consult would be an accountant or bookkeeper.

Hello. I just want to ask when applying for tin online there are these questions:

*Do you intend to engage in trade or business? Yes No
* Do you intend to practice your chosen profession / perform service for a fee as self-employed individual? Yes No
* Are you at the same time an employee? Yes No

I’m working as an employee of an IT Company
It’s for a long-term position

Hi! I got confused with all the info I got. So I want to ask about a specific situation.
Like the other who gave their comments, I too am a home based online tutor/ independent contractor. I used to be a local employee, a term used by the BIR personnel I talked with. I resigned in 2014 and became an “official online tutor/independent contractor” last May 30, 2015. The company said it will deduct 10% of my salary if I will have the Sworn Declaration that I am receiving an income of less than 720,000 pesos a year in accordance with Revenue Regulation 30-2003, notarized and stamped by the BIR. If I don’t do this before June 30 they will deduct 15% tax. I went to BIR and they told me to change my status of employment first, because according to their record, I am still a “local employee.” I went back to my company and they said, no tutors have experienced this before. My situation was the first. All tutors before me had no problem and BIR just stamped and accepted the Sworn Declaration without the change of status. Now I’m confused and don’t know what to do. Can you give an advice? Thank you.

To be completely honest, I’m stumped as well. This is the first time I’ve encountered this question. And our accountant friend said that it would be best if you talk with your company accountant or local BIR on how to iron this out. Without all the information available it would be difficult to give an accurate answer. Sorry!

First, I want to say thank you for going out of your way to explain these kinds of things. They are very helpful for freelancers like me. Anyway…

Much like some of your readers/posters, I am getting into the tax thing quite late. I started working as a freelancer at quite a young age (early college years) and have been making a good amount of money through directing and videography. However, because of the deductions that were there, I honestly thought that was enough tax-wise. Oops. Wrong! Now that I’m sort of moving up “the ladder”, I’d like to properly abide by the law and actually pay my taxes (even if I know part of it will go to the crocodiles in congress/senate and Malacanang- yikes).

So my question are:

1. Being a freelancer since 2011 and not having paid a single ITR, how much will I have to pay considering I have no real way to track down my fees of past years?

2. Will I go to jail or something if I can’t afford them? Will I get penalized? How will I get penalized?

3. Or is there some kind of trial-by-combat/ amnesty I can avail of?

I honestly just want to do this right now that I am more knowledgeable about this grown-up stuff but just don’t know where to start. I’m scared that once I actually start paying my taxes, BIR/Mrs. Henares will come knocking at my door whisking me away to some unknown dungeon in Westeros and feeding me to dragons… while having the news posted on Inquirer to make an example out me.

Anyway, I hope you can help me with this. Where do I start? Where do I begin? I see that your usual reply to cases like mine is to “consult with an accountant/ tax person” but where do I even find him/her? And for my case, what do I do without being penalized or locked up (or is this part completely unavoidable? ) And when you say “consult with an accountant/ tax person” does this mean people like me are doomed? Is that the nice way of saying, “sorry buddy, you’re in big trouble… so go talk to someone who may be able to save your butt!” haha.

Seriously though. I hope you can help someone like me. I just want to do what’s right but don’t know where to begin.

Thanks for the comment! First and foremost, I need to explain that I am not a tax professional. I have consulted with an accountant and bookkeeper on this article (and on most of the questions here) and as much as possible I only answer questions that I understand completely. For everything else, I tell my readers to consult an accountant/bookeeper because they would be the best people to give you the right answers. There’s an accountant in almost every city in the Philippines and here’s a directory of them: http://www.picpa.com.ph/

Now, about your questions:

Where do I start? Where do I begin? – You should start by getting your TIN if you don’t have that yet. The procedure is also in the article. You can do it online or go to your RDO.

1. Being a freelancer since 2011 and not having paid a single ITR, how much will I have to pay considering I have no real way to track down my fees of past years? – This would depend on whether you already have your TIN or not. If you don’t have your TIN yet and you haven’t registered yet as an independent contractor, you don’t need to worry about this. If you already have your TIN and you’ve been registered since 2011, then it’s time to get an accountant.

2. Will I go to jail or something if I can’t afford them? Will I get penalized? How will I get penalized? Regarding the penalties, it depends. Some penalties are small enough that you can afford to pay them. Some penalties can be negotiated if you make an effort to put things in good order.

3. Or is there some kind of trial-by-combat/ amnesty I can avail of? Yes, there are amnesty programs.

I would like to ask if there is any issue or problem with having two jobs with the proper deductions and remittance of taxes. I have 2 employers since it is a need for me to have more than one job because of financial needs for my family. I work at night in a bpo industry and I also work at day time both are full time, both my employer are deducting me exact withholding taxes. Will I be question or will there be any problem in the future? though I don’t have plan of staying long/ keeping in one of my job. This is just temporary bec of financial problem. Some says I might be ask by your office…

Check the BIR’s website or visit your local RDO to see if your TIN is registered to your name. If there’s no TIN attached to your name, then you can have your employer get your TIN. If the TIN number is already registered to your name, pay the P500 as soon as you can and give it to your employer.

Hi!
I just want to ask I am trying to get a TIN Number because it is recquired for the job that I am applying online. I went to BIR and told me that one of the requirements is the company certificate but the company does not issue this certificate because they say that I am an independent contractor. What should I do? I really need to finish the requirements as soon as possible. Hoping that you could help me.

You don’t need a company certificate to get a TIN number, you can just apply as an individual/independent contractor. And it would be easiest if you apply for your TIN online. Just visit the BIR website for more details.

Can you recommend a BIR accredited accountant/bookkeeper with good (affordable) fees for self-employed individuals like us? I understand we also have to pay an accountant a monthly fee, thus another deduction from our income aside from the taxes.

Sorry we can’t recommend anyone since it varies from area to area. You can ask your local BIR for a list of accredited or your local PICPA chapter. Regarding bookkeeper, in our case, we pay our bookkeeper a quarterly retainer’s fee, not monthly. And it depends on the kind of transactions you need accomplished.

I work as an editor via onlinejobs.ph and get paid below 10k every month since I’m only doing this part-time. I don’t have any other job, just this one. My salary is paid by the employer through Paypal. I already have a TIN since 2011 and I’ve only started working online since last year.

Is my ‘salary’ taxable?
Will I be penalized for not declaring my meager income and paying my taxes?

I need ITR, for visa Application, I do have TIN already and have worked for the company as apprentice for 9 months 4 years ago and I think I’m exempted because i earn 4 thou. If i go to BIR now, and declare that I’m working for online job earning not fixed income more than 10 thousand, what should I bring as proof as I received only payment thru paypal..Printing Paypal transaction and showing this as receipt is that ok?..If not how can I obtain receipt as proof of income to them?

You didn’t get a TIN ID or ITR from your former employer? If not, most likely the call center you worked for has your TIN registered at their RDO (regional district office). If you can figure out what RDO your former company belongs to, you can ask that RDO for your TIN.

That depends. Are you hired by the company as an employee or are you hired as an independent contractor. If you’re hired as an employee, then you won’t have a problem since the company would be the one doing the processing. If you’re hired as an independent contractor, then the procedures of the blog post would be applicable to you.

Because I have been employed all my life, just looking at the tons of forms needed and the payments needed to be made, monthly, quarterly and annually, makes me dizzy. I’m caring for my mom (she’s bedridden) that’s why I’m looking at working from home (contractor) in the near future. I have been scouting the net for information I need to know before I jump into the virtual world (this includes paying SSS, Pagibig & Philhealth voluntarily). But don’t get me wrong, this blog is as clear as crystal. Thanks heaps!

Though, I want to know, is there an option for us to make the payment, say, just quarterly or once every year, perhaps (to save us the trouble of going through it every month or every 3 months since these payments get deducted to the tax amount at the end of the year anyway) for more convenience?

You mentioned this on your article: “But the truth is the BIR is still working on how to categorize online workers.”

Reading you article and a few comments from your readers, I came up with these questions:

1) If you’re an online worker and your income is generated from an overseas source/employer (ex. US, UK, Europe), are your subject to pay taxes here in the Philippines? If yes, can you cite a BIR law for that? Otherwise, can you clarify please or guide me in relation to your statement above why one should not pay taxes at this moment considering that BIR is still working…

2) I’m thinking of Overseas Filipino Workers which according to BIR “OFW’s salary from abroad is not subject to income tax”. Are Online Filipino Workers (coincidence aka OFW) getting their salary abroad can enjoy the same benefits?

Thanks. You answers will greatly help millions of Online Filipino Workers.

1) If you’re an online worker and your income is generated from an overseas source/employer (ex. US, UK, Europe), are your subject to pay taxes here in the Philippines? If yes, can you cite a BIR law for that? Otherwise, can you clarify please or guide me in relation to your statement above why one should not pay taxes at this moment considering that BIR is still working…

My answer is I can’t cite a law because as I have said in the blog post, I am not an expert. I have consulted an accountant for help on this article and we focused mainly on the issue of taxes. If you want the BIR law for this, the best person to consult would be a tax lawyer. But I can assure you that in my consultations with the BIR and accountants, for online workers, that even though our source of income is abroad, we are still considered taxable since we are providing a service and we’re working in the Philippines. OFWs in the other hand, work abroad and the money they send to the Philippines is a remittance, not payment for services rendered.

2) I’m thinking of Overseas Filipino Workers which according to BIR “OFW’s salary from abroad is not subject to income tax”. Are Online Filipino Workers (coincidence aka OFW) getting their salary abroad can enjoy the same benefits?
Same answer as above. And to be completely honest, there’s still a continuing debate on this within the online worker communities in the Philippines. If you wish to enjoy the same benefits as OFWs, by all means do so. My motivation behind is article is mainly to provide information for online workers who do want to pay their taxes, since paying taxes provides workers with an ITR, which is needed is you want to apply for bank loans, go abroad, etc.

You are both entitled to 50K each yes. You can file jointly or separately, depending on what works for you or which is more convenient. I suggest you consult an accountant or bookkeeper for this since joint filings are beyond the scope of my knowledge.

However, I have a few questions, the deadline for the quarterly income tax (2nd) is near. I’m quite confused because I’m not sure if I should fill out #35 in the 1701Q form. In your blog, it seems like you’re manually computing the quarterly tax without referencing to the previous quarters?

In the eBIRForms, if I fill out #35, it will used the previous quarter + the current quarter for my final taxable income. If I will fill out 38C/D, the amount I paid last quarter, the final taxable income won’t match compared to the manual process.

Example:
Q1 has a net of 100,000
OSD is applied so taxable income is 60,000
tax due will be 7,000

Q2 has a sudden change in sales, let’s say it went to 50,000
OSD is applied so taxable income is 30,000
tax due will be 2,500

However, if you used the eBIRForms and fill out #35 and #38C/D
Q2 tax due will be 5,500 even if I already paid 7,000 from the previous month? Are these fields not really necessary or they are used in a different case?

From what I understand, the Quarterly tax seems to get the average which means they are dependent on each other? I’m quite confused, please do enlighten me. Thank you.

However, I have a few questions, the deadline for the quarterly income tax (2nd) is near. I’m quite confused because I’m not sure if I should fill out #35 in the 1701Q form. In your blog, it seems like you’re manually computing the quarterly tax without referencing to the previous quarters? – Yes, you’re right. And the reason I did this is for the sake of simplicity. As I have mentioned in the blog post, I am not a tax expert and I wrote this in partnership with a bookkeeper/accountant. The reason they taught to me this way to make it easier for me to understand the process.

And from what they explained to me, you can include the previous quarters payments in your 1701Q or in the annual form. I chose the have the deductions on the annual form the make the process more straightforward.

When you fill up #35 and #38 C/D, you quarterly tax will influence one another since it takes into consideration how much you paid prior. Either the tax could be lower (through deductions) or higher (if there’s a gap).

From what the accountant explained, these fields are optional. But this option is present because in some cases the taxes maybe lower or paying taxes that way would be more convenient. It would be best if you consult with a bookkeeper or accountant so you’ll be given the best recommendation on how to fill up your form.

Julia, reading your article has been so timely. I was employed quite a number of years from a number of companies with industries ranging from Animation to Graphics and Web Design. I shifted to being an online worker as a Graphics and Web Designer a few years ago when I got retrenched from my regular job. It was hard for the first few months because I can hardly find clients. Then I got blessed with a US client who referred me to her friends who in turn became my regular clients; all from the US also.

Now, I got used to the practice where the companies from my regular jobs in the past took care of my tax. After my online jobs started to come in I wanted to pay my tax again. I approached a CPA friend, the accountant of our church, and asked her help to take care of my tax as a sideline. Since she does have several sidelines like that I thought it would be a perfect arrangement. When she learned that all my online work come from the US she told me that my earnings are not taxable. I took her word for it; she being the expert. But I am having a feeling of burden lately about paying taxes; call it ‘guilt-feeling’. So I researched on the net about my particular case. One article affirmed my accountant friend that my earnings from abroad is not taxable since the BIR has no jurisdiction over it (https://maribetholiver.wordpress.com/2013/08/01/why-ph-internet-freelancers-need-not-to-pay-tax-as-self-employed/). I decided not to rest on that info alone and searched some more until I came across your blog. Now I have decided to follow your recommendations and tips and be a good Filipino Citizen by paying my tax.

It is already August 2015. Is it OK if I start declaring my earnings this August? Will BIR still require me to fill-up my earnings since January when I file my annual ITR? Will BIR also run after the years I have not paid my taxes since turning to being an online worker and be penalized for that? This last question is a BIG reason why I am scared to go to BIR to inquire how to pay my taxes. I am afraid to be questioned why I have not paid taxes after I lost my job and shifted to being an online worker. The thought of being penalized for being a delinquent taxpayer or worst go to jail for being a TAX EVADER petrifies me.

What kind of Books should I keep? If I opted for Optional Standard Deductible (OSD), what will be the implication be on the Books I keep? Should I bring my Books when I pay my monthly and quarterly taxes?

For the most part, you only need a book of accounts to keep track of your earning and expenses. If you opt for OSD, you don’t need to detail your business expenses. But if you opt for OSD, it’s with the understanding that all of your business expenses would be covered by it so you can’t have any additional deductions.

No, you don’t need to bring your books when you pay your taxes. You just need it for your records in order to be audited.

Is it OK if I start declaring my earnings this August? Will BIR still require me to fill-up my earnings since January when I file my annual ITR? Will BIR also run after the years I have not paid my taxes since turning to being an online worker and be penalized for that? – Before you start paying taxes, I need to ask, are you registered as an independent contractor/sole proprietor. As I explained in the article, after you get your TIN, you have to register first and you can start declaring your income from the start of your registration.

I am not yet registered as an independent contractor/sole proprietor. It was only after reading your blog that I decided to start paying my tax as an independent contractor.

The way I understood it in the last sentence of your reply, I can start declaring my income once I get registered and have been handed my COR, is that it? So if I get registered in August and start declaring my income for this month, then I will pay my first Quarterly Income Tax on November 15, 2015 that will represent just my August and September 2015 income, is that correct? So, my 2015 ITR will reflect my accumulated income from August to December 2015 only?

I have already been employed in the government and I have already been paying BIR taxes as well since I started my job. Recently I just have a second job which is an Online English Tutor and my Employer deducted 10% for BIR tax. Now my question is, is it legal to pay BIR tax twice a month by the same person for having two different jobs? Please help me understand this. I don’t know much about the labor laws because I am not a lawyer. Thank you very much, and more power.

Hello! I keep coming back to your blog whenever I’m confused about which forms to use or how to go about my tax filing and all that stuff. This blog is really very helpful!

I just have one question though is the form used for the monthly percentage tax different from those online workers who have 10% or so deducted from their income? What do I do in such a case? I hope you can explain to me how to go about that or at least lead me to a clear and reliable site or other such places.

I’m really thankful I found this website! I hope you never get tired helping strangers (most especially freelancers) with their tax woes!

I am writing because I am having trouble filling up form 2551M online. What exactly does Taxable Amount mean? Do I put in the amount BEFORE or AFTER the tax withheld?

I got a form 2307 from the last freelance job I completed. So I have to fill out the bottom part of the 2551M where there is “Tax Withheld Claimed As Tax Credit” written. Do I just copy the details from the form 2307 given to me? What do I put in the “Applied” box?

Hi Julia! Thanks for putting up this post, it’s been really informative and helpful for all of us.

I’m still trying to get a good grasp of this before I file my application with BIR. I guess the primary thing that’s holding me back is that I travel a lot and my work as a freelancer is location independent. Would it be possible to pay the taxes just annually, instead of paying it monthly and quarterly? From what I understand, this option will be a bit straining on the wallet since it’s going to be lump sum instead of installments. I don’t mind though, it might be more beneficial for me since I would just have to keep track of one date and fix my travel sched around that.

A Company is doing business here and in the US for e.g has a branch here and employees but what about those that operate without branch ? Yep those are the Tax Evaders from Australia – US – Europe, etc. the Freelancer and most of them i meet are considered by law a Employee – you cant register a business as employee !!

Even if you do so its in general supporting crimes against competition law and foreign tax evaders. Paying tax for something you shouldn’t is considered as dumb.

Fact: most in Philippines don’t know the law or have no lust to learn it, sadly to see that the BIR is jumping on the wrong boat because they not understand the first question or meaning,
“Contractor vs. Employee”

Nevertheless think you own a BPO and have 20 employees you pay your tax etc. aside you need all permissions. If a Corporation fails to register and hires Employees without having all permits its done for one reason: TAX Evasion and when you see this in relation to your business with 20 employees well than this is called a unfair advantage. This Tax Evader will not pay any Pay roll or business neither income tax.

Hi, I am currently working in Japan as an IT staff but I have a part time job too in the Philippines. My part time job is teaching English language to Japanese students. Philippine based account. Should I still need to pay taxes to PH government? Please let me know! Thank you!

That depends. Are you hired by the company as an employee or are you hired as an independent contractor. If you’re hired as an employee, then you won’t have a problem since the company would be the one doing the processing. If you’re hired as an independent contractor, then the procedures of the blog post would be applicable to you.

About the annual tax return, shouldn’t you deduct the FOUR quarterly taxes you filed instead of just THREE? Or is it the case that the FOURTH QUARTER tax and the ANNUAL TAX are aggregated, which is why you only deduct three quarters instead of four?

The 4th quarter and the annual tax are already aggregated. Or think about it this way. Once you have paid the 4th quarter tax, you have basically paid your entire annual income tax. Which is why there is no 4th quarter and it’s just called the annual tax.

Would like to seek advice sana how would be my approach on this situation:

My taxable period starts june 2015 (as online worker in IT) up to now but yesterday my boss told me they want to convert me as fulltime officebased employee to their soon to open office in Taguig. Tentatively, I will stop as self employed online worker by Oct. My plan of changing RDO (previous rdo is taguig also) is pending due to the announcement. Will I still need to change RDO from taguig to san juan (home office) when eventually it will be again taguig? How will be my tax computation quarterly from july up to the nov 15 duedate?

Thank you for this. Does this also apply to me, I am employed full-time by a US-Company but the nature of my job is online. Some people have told me I only need to file ITR every end of the year. But this article is saying I should be considered self-employed/sole proprietor (by the way, I also have a registered business on the side, so this confuses me even more)…

I hope you can shed some light. Even CPA’s I’ve talked to have conflicting opinions.

If I am to file ITR every end of the year, what computation would it be?

As far as I know it would be illegal to have duplicate records. And since it’s clear that you were unemployed for 2 years, there shouldn’t be a problem with your records. But to make sure, please consult an accountant for the best course of action.

Hello po. I’ve been an online freelancer for a year but it’s my first time working with an employer who deducts 2% tax. I only work as a PART-TIME freelancer and I’m applying for a full-time job right now. Will my FULL-TIME employer know I have a PART-TIME job by looking at my taxes. Are they allowed to look at my tax records?

Hi, I’m a self-employed professional with plans to freelance online (oDesk, or English tutorial). I have no TIN yet and I am getting soon. I hold two professional licenses. Would that mean I am going to pay the income taxes of my two professions as well as the 3% tax for online freelancing? Should the applications be filed separately? Thanks.

Allow me to post my sentiments here. I just wish the online workers will follow suit instead of just posting comments. Reading is not enough. It would be best for them to visit their BIR office and follow the process. In a nutshell, they cannot file their ITR without BIR registration. Sa mga winiwitholdan ng 10% monthly, you cannot claim it as tax credit because you cannot file your quarterly ITR and annual ITR unless you are registered as self-employed with the BIR. Meaningless din ang computation kung hinde sila registered sa BIR.

Nice blog, by the way. You were able to explain income tax in a meaningful way.

I totally agree. And if you read the blog post, it’s actually specified in the first part that you first have to get your TIN and register as self employed with the BIR. This blog post is simply meant to help people understand the process and shouldn’t be taken as gospel.

If I started freelancing January of this year, but registered only today (October), can I still pay for my income tax for the previous months/quarters? May penalties ba? Or can I just file in April 2016 for everything?

Good eve po. Thank you for this informative and dynamic site. As follow-up question po sa concern about 38E/F Creditable Tax Withheld for the previous quarter(s), my questions are:
1. Since I am now using eBIRform software V.6, everything is automatically computed, but I would just like to confirm, ang “Creditable Tax Withheld for the previous quarter(s)” po ba eh ang na withhold ni company (considering I am an Independent contracting receiving 2307 form from them every quarter) nung previous quarter? So in case Im filing 1701Q (2nd quarter), 38E – is the 38G of 1701Q (1st quarter)?
2. In filing Annual ITR (1701), are Creditable Tax Withheld from 1st to 3rd quarter to be summed up? Thanks po.

I just have a question though. You mentioned that part of the requirements in getting a COR is “BIR Form 1905 (for those who already have a TIN and used to work in an office, to change your Regional District Office)” — just wondering if this applies to my case.

When I was still a student, I got a TIN number at my home’s RDO 39 (Quezon City) when I applied for a Student Permit/Driver’s License. I, since then, worked in companies located in Mandaluyong, Makati, and Taguig using the same TIN number. I just recently resigned and decided to just work as an online freelancer here at home.

When registering as a self-employed professional and getting a COR, should I still file form 1905, given that the RDO where I got my TIN and where I will register myself as self-employed is the same?

I just recently resigned as an employee and now wish to register in BIR as a freelancer/self-employed professional. Do I need to file form 1905 before applying for a Certificate of Registration? If yes, how do I go about filling up the form? Thank you

I just want to say thank you for this comprehensive blog. I’m glad to have found a great guide to paying my taxes.

I hope that every Filipino citizen would do their duty and pay their taxes. A lot are hesitant to pay taxes because they think that it would just go to the pockets of the corrupt government officials. That’s a fact everywhere we go. There will always be people like Janet Napoles. But it is not an excuse to not pay our taxes. If everyone would think the same way, the Philippines will not get out of the quagmire that it’s in. Let God/karma deal with those thieves. Even Jesus said that it is lawful to pay taxes.

Taxes makes it possible for us to use the roads and sidewalks, study in public schools, get treated in public hospitals, get police protection, and enjoy the other infrastructures built by the government. Taxes are very important.

This article shows that it’s not really expensive to pay taxes. I hope everyone will be encouraged to do so. Let’s do our bit to help the country. We can do this!

Thank you for this great blog, alot of info.. But I actually had to read the comments more than the whole steps.

I hope you can help me understand, since ive been reading articles from the net lang about online busines.

Me and my friend just put up an online events and party organizing business, and just had our first client. But they are asking for an OR since they are a company and needs it for bir purposes daw, or we can provide daw an AR if wla OR. Is an AR just an acknowledgement receipt that doesnt need BIR registration since urgent na nmen kailangan. Or if we are to register to BIR, are we going to be required to pay taxes since we dont have a regular income naman, and it will just depend if someone will get our services? Are we qualified as BMBE and is qualified for tax exemption? Btw, I registered as sole proprietor instead of a partnership because lesser hassle daw. And how about the “books”? I dont have an idea on how to go about that.

We actually just registered and plan to undergo the tedious process just to provide our client a receipt.

Ms. Julia, i would greatly appreciate you reply about this. Totally, no knowledge about how to go about this.

I have just started working as a fulltime online ESL tutor. I already have a TIN and I’m planning to register as an online tutor at BIR soon. Although, I’m skeptical about it because I don’t know whether online teachers also need to make book accounts, since I earn on a monthly basis. The company already withholds 10% from our monthly salary and provides form 2307. In such case, do I still need to make book of accounts and issue receipts as well. I hope you can enlighten me on this. Thank you very much, I hope to hear from you soon. God bless

Since your employer already withholds a portion of your income and provides your with a form 2307, I don’t think it would be necessary for you to register since you would be considered an employee. To be sure, please check with your company’s accounting dept.

Thank you very much for the prompt reply.Sorry to bother you again po. I am considered an independent contractor daw po and not an employee. So since they withhold 10% from my salary every month, do I still need to pay monthly percentage tax and can I just file ITR once a year? Saka po I have a PRC license na po, do I still need to secure occupational permit?Thanks po ulit and pasensya na po sa dami ng questions.

Hello po. First, just wanna say how helpful this article is. I, too, is an online worker for more than 5 years now but I have never filed tax before.

I am an online tutor. My company deducts 10% withholding tax of my monthly wage. So what should I do with that? I mean, how can I declare that the company is already withholding 10% of my monthly income?

If your company is already deducting tax, you don’t need to pay your income tax but you would need to ask your company for a copy of the taxes they’ve withheld. That way, if you want to file your taxes you can show that you have already paid through your company.

You have a great information for us.
But still I need to know for filing of 2251M what if I have income but I did not issued yet OR to a customer because not yet received the printed OR that time.
Do I need to declare it as income or excluded it?

Thank you so much for explaining all that! It clarifies a lot of things. Would you might if I took your comment in verbatim to update the post? I want to make sure that the post would be accurate. I hope I can also credit you on the update. Would it be okay if I ask for your full name? Or do you have a website or a blog so I can credit you on the corrected information?

I just want to tell you that I finally got my COR last December 15, 2015, thanks to you.

My question is – since I registered only last December 15, 2015, am I eligible to file for annual tax return come April 2016? Also, I have no idea what to put on the notebook that I received when I got my COR. What should I put in there? Would you believe that I was able to obtain my COR without them (BIR) giving me a seminar on it?

Regarding your tax return, since you only got your COR on Dec. 15, 2015, you can file for annual tax on April 2016 but I believe that would only cover December.

Regarding your notebook, that’s where you should list your income and expenses. In this case, I think it would be better if you consult with a bookkeeper so he/she can help you fill that out. I don’t know much about your work so I’m not sure if I would be giving you the right information on that one.

Hi Julia. I want to ask in the form (where there’s a name for the Spouse Name). My husband is a foreigner working in Norway. Do I need to write his name on the form including his TIN no.? He’s working in Norway while I’m working here in the Philippines. Thanks.

Yes, you need to fill in his name in the general information section (it’s usually on the front of the form). It’s your option to file jointly or individually. And since your husband is a foreigner, I think it would be best to consult with an accountant or bookkeeper to get more information on how to do it properly.

Thank you Julia. I will consult that. I have another questions: I have TIN no. (when I worked before in an office), my questions:
1) Do I need to attend the taxpayer’s briefing to get my Certificate of Registration? 2) Can I can update my TIN Card with change of status from single to married using my husband’s surname and using the Form 1905?
3) I’m working as Online Graphic Designer, do I need to show to the BIR Officer my Certificate of Employment that I just got hired.
4) Lastly, I’m confused with the Books of Account: 1 ledger, linear journal, 1 professional income book, 1 subsidiary purchases/ expenses book and must print the invoices/ receipts printing (booklets of invoice/ receipt on the BIR Accredited Printers >>> Do I need these??? I’m really confuse on this.

Thank you so much and sorry I have many questions. Thanks and more power Julia!

It’s January now. I got to renew my certificate of registration which is P500. Do I have to pay again for the Professional Tax? I’m quite saddened by the government because they have different view. Some says I don’t need Mayor’s Permit anymore since I am only home-based, while some says I have to because it’s still business…. Huhuhu. I’m also saddened because when I help my friend to close his registration, he was asked with several requirements – the hardest part is the Certification from the local government that he is now closing his business. They won’t give them that because he did not get Mayor’s Permit. How disappointing is the government. It is us who are doing our best to be responsible by paying taxes, but it is us who is being burdened of not helping. Tsk. Tsk.

Yes, if you are both a citizen and resident of the Philippines. There is the Philippine-US tax treaty to avoid double taxation. If the tax rate of the Philippines is higher than the US, you pay the remaining balance to the BIR. Consult a lawyer / accountant if needed.

I already have a TIN since 2010 as I worked as an ESL instructor and I have started working online since mid July of 2014.

I have my own website and sell my own digital tutorial ebooks. The first 6 months (July to December 2014) I was averaging at 12k to 15k every month. Since January 2015 to December 2015 I get sales around 20k to 30k pesos every month since I’m doing this full time. I don’t have any other job, just this one. I am getting paid via PayPal and transfer it to my bank in a form of ‘Remittance’. I also see on bank account that they are automatically deducting ‘Withholding Tax’.

I also got a house which I’m paying on a monthly amortization.

I am so worried and confused now about this ‘BIR thing’ since I haven’t register my online business… They (BIR) might question me about how I got a house…

Will I be penalized for not declaring my income and paying my taxes since 2014?

Is it still OK to register my online business (like I was still starting out) this month of January 2016? What will I tell them?

I have to reiterate that I am not an expert. I stated that in the start of the blog post. I consulted with an accountant on a very specific topic. Beyond those circumstances I have very little knowledge on the rest of the Philippine tax system.

I think it would be better if you consult with an accountant about this. I don’t think there’s anything wrong with you registering your business this year. But regarding everything else, you will need to talk to your accountant on how to go about with things.

I’m currently employed (fulltime) in US but I’m working here in the Philippines. My salary is hourly based (USD) and I am required to work 8 hours per day or 40hrs per week. So meaning I don’t receive same salary every month because sometimes there are 21,22,23 working days per month.

I’m receiving my salary thru PayPal. How can I declare my monthly income if it is not fixed every month? Should I present any income proof to BIR? I don’t have any payslip or monthly invoice. Or can I declare a fixed amount of my income?

You can just declare a fixed incomes based on what you receive on average. Unfortunately, I can’t recommend an accountant for you because I don’t know where you are based. The best place to ask would be your local PICPA: http://www.picpa.com.ph/

In your initial computation, you need to pay 28k quarterly. And your annual computation is P78,760. You pay P28 for the first 3 quarters of the year. For the last quarter (in April) you’ll pay P78,760 – (P28,000 X 3) = -P5,240. This means the government would owe you P5,240. You can claim this as a deductable in your next quarter tax or next annual tax.

But this is just from the information you have given me. For the best information, please consult a bookkeeper or accountant. He or she may be able to help you more with this.

Hello po, I just want a clarification. Based on my contract though this is a online job I will be deducted with the 10% witholding tax and in case I won’t send in a sworn of declaration it will be 15%. Since we will be tax this way it is mandatory to file for the certification for registration as an Independent tax payer and pay the tax of 3%? It’s like were an employee of a company, so I think there no need to file but the company insist. Will it be unfair if we’re going to file as independent tax payer but debited with the normal employee? Just wondering, seems not right.

Why would his 2Q and 3Q payments be different if he earned the same amount each month. I find that confusing. Can you show the computation for this?

@. I consulted an accountant with this (several times) and he said that percentage tax can still be deducted with OSD. But you say that you can’t do it with OSD. Why? Does this the monthly percentage tax can be deducted if you don’t take the OSD? And if you opt for OSD does that mean you have to pay monthly percentage tax? But you mentioned that monthly percentage tax is part of Item 33. So he can declare but not deduct?

Thanks for taking the time to comment. I really want this post to be accurate so your response would be welcome.

Hi! I am not sure if this has been answered already, anyway, I got my TIN number when I worked in Alabang from 2011-2014. However, I resigned and started working as an online employee since 2014. I traveled most of the time, though, so working online was not a full time job. I plan to work full time as an online employee this year, and continue pay my taxes as an independent payor. So I need to get COR again, right? If I register this month (Feb), and decided to pay quarterly, should I pay this April or August 15? Also, do BIR offices do advice on this matter? Since I am totally lost on this, I plan to visit and ask them myself. Otherwise, do you know where I can contact them for advice? Thanks very much in advance! And thumbs up for your very informative article!

Hi Kaye! You don’t need to get a TIN but you do need to get A COR as an sole proprietor/independent contractor. You can ask your BIR office regarding it. But based on our experience it might be better to consult an accountant/bookkeeper. They’re often more accommodating. And If possible pay for the consultation so their advice would be more tailored to your needs.

I am working on updating this but it hasn’t been updated yet. I’m waiting for one of the commnenters to confirm that I can use her comments for the update. But if you want to help me update this, I would really appreciate this. I’ll even cite you as a source.

Another thing, I don’t issue any receipt at all. The payment for my services are being sent via wire transfer and/or bank transfer. That said, are “Cash Receipt” and “Cash Disbursement” Journals required? I am not registering a business, so I assume that’s unnecessary. Please confirm.

re: Receipts, you still need to issue them even if your clients don’t expect them. The receipts are the basis of your income. So what you write in your cash receipt journal is based on the the receipts issued.

First off, this blog is really helpful. My apologies for not mentioning that earlier. Although the situations may differ for each individual, am really glad that there is open board for inquiries such as this.

On to my concern. I believe receipts are for registered businesses (correct me if I am wrong), something that I am not. You can think of me as a contractor. The company that pays me is based abroad; however, the company is not registered here in the Philippines. Should I be paying as Self-Employed or as a Contractor or my situation is something else entirely? When paying as a Contractor, does that require having to issue receipts. And do we have the same set of rules or calculations based on what you have explained in this blog?

Hmmm, nevermind. Am guessing that is going to be the Cash Receipt books. What’s the Cash Disbursement books for anyway? Are those for expenses? Expenses do include Internet, Electric, Components used for working online, is that correct?

I worked abroad for 3 years. I pay tax abroad as well. Now I need to go back to PH and I never had TIN. My employer abroad would like to keep me to work for them even if I am moving to PH through online work or work-from-home basis. Do I need to file my tax as self-employed online worker?

No. The BIR has never asked me any 0605 form since I started filing returns years ago. It’s usually used for payment of the annual registration and if you opt to pay 50% of your annual income tax on or before April 15, that form is used to pay the remaining 50% on or before the June 15 deadline.

Regarding the refund, it would be easier if you just declare your extra tax payment and deduct it to your current payment. It would be best if you consult with an accountant or bookkeeper to get the right computation.

Hi po. Taxable po ba if part time lng po ako..earning lower than the minimum wage..im aware namn po n excepted ang minimum wage earners.. Pro may pinagkaiba po b? Kasi I worked as a part time for 4 months then for 8 months I worked fultym having 600 basic salary and 2500 allowans.. So panu po pagcompute noon. Thanks a lot. Godbless po.

Wanted to know if when paying taxes for Quarterly Should I present any income proof to BIR? since I don’t have any payslip or monthly invoice. I mean do I need to show invoice or just declare a fixed amount of my income on the form? also how can I declare my monthly income if it is not fixed every month? let say if I will pay for first quarter: January: 15k , February : 20k , March 18k ,25k and so.. so total for the 3 months salary is 53k how thus I declare that on the form and do need to attached invoice or so? But I dont have any invoices..

Also ms julia do I really need an accountant even if i use the optional standard deductible? since BIR now have a eBIRForms software.. hope you can answer this
because i’m afraid I cant fine an accountant and afford to pay them

This post has been quite helpful and I was hoping you could help me further with my case. I’m a blogger and will be under contract with a brand. They have asked me to get a BIR Form 2303. Upon research it seems to get the BIR Form 2303 I have to get a 1901. I already have a TIN though and I don’t have any intention of setting up a business. This engagement that I have is a one time deal. How do I go about getting a 2303 please? Thank you in advance!

I have a question in regard of the declarations of deductables like SSS, Pagibig, Philhealth, Internet payments, Electric bills , I actually quite confused on this, and I am receiving my income every week if you are familiar with Upwork(Odesk) , My income every week is 120 USD but the Upwork will deduct 10% of my income amount and everytime I withdraw my funds in upwork ,, Upwork will charge .99USD per withrawal,,, so do I need to declare the entire amount the 120 USD or the amount that I only received?

2nd question , can We consider Online Jobs as a business , if yes do I need to get a business permit?

3rd question where do I register ? in my local like , Municipality? or in the City?

4th question are the BIR people will required also a proof of income? so if yes can I use the bank staement with every remittance or the withdrawal slip I have every time I withraw online..

I appreciate the information posted here in your blog , at least now I know I can pay my tax and a good follower of the Philippine tax law ^_^

Thank you for your question. I will try to answer them to the best of my ability. But please note that the best person to answer this would be an accountant or bookkeeper.

1. Only declare the amount you received. The 10% Upwork deducts from your salary is not taxes, it’s a fee for their services.
2. Yes, online jobs is considered as a business. As to whether you need a business permit, it depends on the size of your business. You can register as a micro-business (consult the DTI on that)
3. Regarding local laws, please consult your local government on how they recognize local work.
4. Proof of income are your receipts. You don’t need to show them your withdrawal or remittance slips. Just issue a receipt every time you receive payment.

Again, please consult an accountant or bookkeeper for answers best suited for your situation.

As an online worker, I get a professional tax receipt (PTR) every year from my local municipality/city for Php300. A PTR allows me to practice my online profession anywhere in the Philippines, unlike a business permit that’s costly and limits you only to your registered place of business.

Register at your nearest BIR office as a professional taxpayer using your PTR as one of the supporting documents.

I only declare what goes to my bank account as my gross sales/income when I file tax returns. My proof of sale/income is the official receipts (OR) I issue for BIR compliance. My foreign clients don’t need those receipts, so I just throw away the client’s copy of the OR. On the OR, I only write the amount that was actually credited in my bank account.

I don’t bother myself with deductions, I just choose the optional standard deduction (OSD) to avoid confusion and headaches in deducting expenses when filling income tax returns.

This is very very informative and I’m so happy I found it
Just a question
My previous office work was in Manila and now i want to work home from Batangas
Do i need to transfer my records or can I just start updating it as it is?

You will need to transfer your TIN from the Manila RDO to the Batangas RDO if you want to register as an online worker in Batangas. Just go to your nearest BIR office, they can help you transfer your TIN.

This is what happen sa akin,, I am from Cebu City but I need to transfer my TIN from RDO81 to RD080 I followed the PTR which suggested by Francis ,I paid 376.50 including the penalty then I paid 500 php for the registration , make sure you have 3 copies of form 0605 signed from the chief assessment section because the bank will not accept the payment without those signature, then after, they ask me to to attend the seminar and it takes 2 hours and make sure you will ask for the certificate of attendance , photo copy it then you need to purchase a 1 doc stamp 15 php each attach it to the form 0605 and a copy of certificate of attendance after the in charge will give a a piece of paper with the information when you can get your Certificate of attendance, after,,, get an ATP(Authority to print) for your receipt and go to the printing press… as of the the time being I am waiting for the receipts because they said that they will going to forward it to the BIR before I can get it.

Good day! I really find this page so helpful. I just want to ask about tax refund.
Last year 2015 we had two employers. We were with company A for the period of Jan- Feb of last year. and then we were transferred to company B for the period of March up to Dec of last year.
Currently, we are with company B. I tried to ask about tax refund, since we were not able to complete the whole year with them and our tax varies every cut-off but we don’t get clear answers from them.
These are my questions:
a. are we required to get 2316 from company A? what if we can’t be able to get a copy? since we have an issue with them?
b. company b told us that if there is a tax return, this will be available in the month of June.

Good day! I really find this page so helpful. I just want to ask about tax refund.
Last year 2015 we had two employers. We were with company A for the period of Jan- Feb of last year. and then we were transferred to company B for the period of March up to Dec of last year.
Currently, we are with company B. When I tried to ask about tax refund, since we were not able to complete the whole year with them and our tax varies every cut-off but we don’t get clear answers from them.
These are my questions:
a. are we requird to get 2316 from company A? what if we can’t be able to get a copy? since we have an issue with them?
b. company b told us that if there is a tax return, this will be available in the month of june

What business people usually transact at DTI is business name registration. If it’s better and more practical to use your birth certificate (BC) name as a tutor, you don’t need DTI registration because your BC name is already registered at your civil registrar and the National Statistics Authority (the former NSO).
If you’re a self-employed tutor, you need to get a professional tax receipt (PTR) at your local municipality / city in order to practice your profession ANYWHERE in the Philippines.

Hi, I really find this page helpful. I am currently processing my accreditation with the BIR, as a professional I am told to declare my income via efps (so I enrolled). The problem is I do not know how to file 1701 because I have no operation. Could you please provide a guideline to this matter? Thank you and more power.

Alvin, you are required by law to file 1701 annually and 1701Q quarterly for your income taxes. 2551M or Monthly and quarterly VAT are for business taxes, not income tax. You should have known that when if you attended the required BIR briefing for newly registered taxpayers.

Francis I know, 2551M yes they told me that but the 1701 and 1701Q no , briefing is very quick yes you are right I should have known that in the seminar, the question is did they include this topic to the briefing? No , because if it is .. I should have known that , in the first place I followed all the said requirements and I just CURRENTLY done the application meaning I am still in the process and thank for that information perhaps now I know

Hi, thanks for this, It is helpful. I am trying to find my way around this since I am not very good with forms and stuff. I have been working online since 2010.will there be a fee or penalty for all those years i neglected my tax forms? Thank you.

First of all, this specific blog is very concise and I keep coming back here to read this guide as I would be a first time payer and would not want to miss a thing. So, kudos to you and the team!

I will be using OSD to simplify things as I will also do my own books and everything else. So, just to clarify:
1. Monthly percentage tax can be deducted from either the quarterly or annual income tax?
2. If yes, and I choose annual, then that is 12 x 3% Percentage Tax paid for the last 12 months, right?
3. If I paid tax in the 1st quarter, can I deduct it from the next quarter’s payable and so on? Or this can only be deducted annually when filing for the annual income tax?
4. Lastly, when I was employed before, I’ve declared one of my parents as my dependent when she became a senior citizen. Can I still claim this as a deduction aside from my personal deduction? Or this does not matter anymore? Meaning, I can only claim for my personal deduction of 50,000php.

Hi Nervz! I’m glad for your questions. I’ll answer as much as I can based on my understanding. But it would be better if you consult with an accountant or bookkeeper to get the answer best suited for your situation.

1. Monthly percentage tax can be deducted from either the quarterly or annual income tax? – Yes
2. If yes, and I choose annual, then that is 12 x 3% Percentage Tax paid for the last 12 months, right? – Yes of you’ve been paying the same amount every month. If not, you need to add the the 12 payments of percentage tax.
3. If I paid tax in the 1st quarter, can I deduct it from the next quarter’s payable and so on? Or this can only be deducted annually when filing for the annual income tax? You can only deduct them (3 quarter tax payments) from the annual tax
4. Lastly, when I was employed before, I’ve declared one of my parents as my dependent when she became a senior citizen. Can I still claim this as a deduction aside from my personal deduction? Or this does not matter anymore? Meaning, I can only claim for my personal deduction of 50,000php. – This one I’m not sure. So in this case it’s best if you consult with an accountant.

I’ll answer your 4th question. I don’t think it has been the case with your previous employment.
For tax purposes, your parents can never be your qualified dependent. They could have been for your dependent for your Philhealth, HMO, or other insurances.

To qualify as dependent for additional tax exemptions, they must be:
1. Your legitimate child or is legally adopted,
2. not more than 21 years, or regardless of age, if incapable of self-support due to disabilities.
3. unmarried
4. not employed
5. living and depending for chief support

If you have someone who is a qualified dependent based on above, then you can claim them as additional exemption of 25,000 each (but not more than 4), on top of your 50,000 personal exemption.

Yes, I agree that my way would yield a higher taxable income because the OSD is computed from the gross income directly. I consulted with my accountant friend on this f it’s possible to do the computation the other way around (your way) and she insisted that the personal deduction should be removed first before computing for OSD. I’ll try asking her again if there’s another way around it.

Your answers and your time are highly-appreciated. And thank you in advance for trying to find another method in computing for the Annual Income Tax.

I have another question, if you don’t mind. Actually, this would probably be the same as computing for the Annual Income Tax, but again, when talking about numbers, we should be careful, right? Hence, I would ask anyway to be really sure. So, I would like to know – when computing for the Quarterly Income Tax, which should be deducted first from the last quarter’s income:
1. The 40% OSD or
2. the last 3 months Percentage Tax paid?

Again, thank you very much, Julia. And oh! Apologies for misspelling your name in my previous comment/inquiry.

Either choose the 40% OSD or itemized deduction on your 1st quarter income tax return and that will be the ONLY deduction method allowed for the succeeding quarters and the annual income tax of the current year. You’re not allowed to shift from OSD to itemized deduction or vice versa.

If you chose OSD, then you’re not allowed to deduct percentage taxes. If itemized deduction, you can deduct percentage tax.

Who is you employer in this scenario? Is it a local based company?
It is just right for them to withheld tax based on your income on the time that you receive it. I suggest you process your TIN the soonest. The amount withheld will still be reflected in your account.

Hi Bon,
Tama si JLM, file it soonest and then find out if pumasok ang tax payments mo. Kasi some companies don’t pay the government, either they forget or it gets delayed or they do it on purpose. And if wala ka pang TIN, they can say that it’s your fault not theirs. As my HR tita would say, don’t be fooled, check if it was credited to your TIN. But yeah, file first. Madali lang naman yon…supposedly.

Very informative! I am looking into paying taxes and getting an ITR because it’s one major requirement for banks. I hope that there is an article for those who works for the private sector + an online job.

If you are employed and earning solely compensation income from 1 employer during the year, then you a qualified to a substituted tax filing. Meaning your employer will compute, file and pay your taxes for you. The equivalent of the ITR which you will get is the Form 2316 (Certificate of Compensation / Income Tax Withheld). This serves the same purpose for bank requirements (ie getting a loan)

If you have 2 or more sources of income, in the case of having online job on the side, then you are now disqualified for the substituted filing. This is when you will have to prepare your own ITR by consolidating all your gross income and allowable deductions to arrive at your taxable income and tax due.

Hi Julia, thanks a bunch for one massively helpful article!
To Julia and Lemuel, thanks for the clarification above. Finally, I found some clarifications to questions I got in mind.
One small question please…if we are to become a mixed-income earner, we will need to update our taxpayer status first, is that right? Then that will automatically disqualify the taxpayer from substituted filing?

Hello dear,
Thank you for your article, it actually clears up our concern with how to pay taxes on our own since we were used to just having deductions by the company/employer.
Anyway,
Here is the scenario. I want to pay all my taxes for this year starting January 2016. However, I will still apply for registration next month; July.
Question is, will I get penalty for the unpaid taxes from Jan-June
Or do I just need to declare payment of taxes from the date of registration, which is July, meaning ang start lang ng bibilangin ko na pagbayad ng tax is from July onwards not January? (since July ako mgreregister)
If I pay taxes this year, will I get an ITR for the current year by the end of December? or updated naman ang payments mag rereflect online? Thank you so much

Thanks for your questions. Unfortunately, this is a bit beyond my scope. It would be best if you consult with an accountant or bookkeeper so he/she can give you the answers best suited for your situation.

Hi Anne! I’m not an expert either but I had the same problem. Technically speaking, you can’t pay for the months when you were not yet registered. Kung baga sa business, hindi pa recognized yung business mo so there’s no business name to pay under. What makes it scarier is that may fine ang late payment. Hehe. I’m not sure if BIR has thought about such a scenario but right now there’s only provision for paying what you earned after you’ve registered. No one can stop you though from reporting it as as if you earned it after you’ve registered. Although parang mali naman. I doubt if you’ll have any luck asking BIR staff. Perhaps, attend the seminar. But based on experience, asking just anyone in the BIR office doesn’t help. They’re not very keen on these matters. And yes, maybe ask a good accountant. Although ask two or more if you’re not sure kasi ako, I asked an accountant but was advised not to file! Hindi ko daw kailangan because my US client already pays for my taxes in the US. Genun. So now, I haven’t paid my “back” taxes yet. Although di naman kasi ganun kalaki and I didn’t know that I had to when I started freelancing so I was not able to set them aside. Baka mabaon ako sa utang if I pay for them… But hoping to pay for the ones I’ve earned after I’ve registered.

If I were you, I’d start clean from registration date. So far I have not received any notice from the BIR about unpaid taxes prior to my registration a few years ago. If the BIR subjects you to an audit, then follow the legal process with your accountant lawyer.
But if you really want to pay taxes prior to registration, it’s better to consult an accountant / lawyer.

Just start paying your taxes for all your income earned after your registration date.
You have to prepare and file your Income Tax Return yourself first before you can pay to the BIR. Not the other way around.
Your ITR should cover the period from your Registration date up to the end the taxable year.

Most people don’t want to pay taxes because yep, it goes to the government’s pockets. Not just officials, but the tax collectors themselves and project managers too. I’d place a link for proof, but that isn’t something we post publicly. We also don’t do public shaming.

One more reason is the process. It takes too long with too much requirements, and sometimes, these people who process your requirements add additional “fees”. Mind you, these “fees” go to their pockets as well. And going back to requirements, they’re very contradicting. You’re applying for an ID, but requires 2 valid IDs… what? So you’d have to go back and fill out more forms, which require more money to spend and more time to waste.

Yes, it’s our obligation. Our responsibility to help our own nation. But how can we help it if the people who govern the very same nation we try to improve take advantage of us?

Hi! Great article! Thanks so much for this. I have one question though. I’m currently a full-time employee in one of our local companies here in the Philippines and am already paying taxes. I recently applied to and will be working for a US company and since my taxes will be my responsibility and subject to the rules of my company, i’ll have to file for it myself. So I’ll have to pay those taxes apart from the taxes i’m already paying? Please verify. Thanks.

Just to clarify, so you’ll be working for a local company and a US company. And you’re asking if you’ll have to pay taxes for both? The short answer is yes. The long answer is the local company is probably already deducting your incomes taxes from your salary, so no need to worry about that. The only one you’ll be paying on your own is your salary from the US company. But how much you’re already paying in taxes with the local company can affect how much you need to pay. So it would be best to consult an accountant about that to be sure about your computation.

You have to consolidate you income from your local employer and your US employer in your ITR.
Your local employer have been deducting taxes from you monthly. At the end of the year, they will give you BIR form 2316 (Certificate of Compensation/ Income Tax Withheld).
The computation would somehow look as follows:

Local Company Income
+US Company Income
-Allowable deductions
=Taxable Income
-Personal and additional Exemptions
X Income Tax Rate
=Income Tax Payable
-Income Tax already paid (withheld by local employer)
=Net Income Tax still due

I just want to ask if my salary will have a deduction on income tax.
My rate per day was P278. I work from Monday to Saturday.
Im from province of Pangasinan wherein the minimum rate here is P253 but my daily rate now was P278? Does my rate subject to income tax deduction? And may I know the computation table in your website Tax Rate if it is computed Monthly or Annually because our accounting head told that it would be computed Annually?
Kindly please help me.

First, you have to know what is the payroll policy of your company in computation of your EMR (Equivalent Monthly Rate). That is asking what is your divisor/ number of working days in a year?

After knowing it, that is when you can determine if you are taxable or MWE (minimum wage earner).

It is okay to compute annually. The tax table above is based on annual amounts.

Computing tax monthly and annually should give you the same tax due at the end of the year. We annualize the tax computation and make necessary adjustments if needed, that’s why there are sometimes tax refunds at the end of the year. It will only be a matter of timing difference.

Thank you for this wonderful informative post, i never tried to apply for TIN and pay tax since BIR has no right category for us online workers. And so i don’t know how are they gonna implement tax for freelancers. We simply belong to a complicated category of workers that doubles the complication on the processing and filling for it. One of my biggest problem is i need ITR for my personal transactions but i never filled TAX because of those reasons.

Thanks for this post. I’ve registered before already and have tried paying my tax via the BIR’s online thingie and the bank. But I honestly thought I was only supposed to pay for the local transactions because that’s what the accountant I consulted said. She said my client in the US is already paying my taxes. At that time kaka-register ko palang sa BIR and nagulat naman ako kasi nag-effort pa ako tas di pala kailangan. So I’d just like to clarify that I still have to pay right? And I’ll just do what the others are doing, report the amount that goes in the bank para hassle free! Thanks again!

That depends on Whether your employer is also paying taxes (and income taxes) in the Philippines. If he or she is already paying for your income taxes then you don’t need to. If not, you would need to pay taxes. But it would be best to consult an accountant or bookkeeper to avoid taxes.

Love Me
1. You cannot deduct your payment from 2551m to 1701Q because they are different taxes.
2. If your payments from your monthly 1701 were not deducted to their corresponding quarter, you need to amend the concerned quarterly IT return.

Hi, I have read the updated regarding professional tax receipt or PTR. In my case BIR told me to Get a PTR in our local municipality/city. when Filing a tax for Online Worker PTR is not applicable for Online worker since PTR are only for those who has a license profession like Engineers, Doctors, etc. this is what the Head of licencing Dept have explained to me…

Margie, here’s a copy of a BIR document:ftp://ftp.bir.gov.ph/webadmin1/pdf/66017RMC%20No%2064-2012.pdf
Perhaps you print it and show it to that official. The first sentence of the 2nd paragraph states:
“Professional, classified as self-employed, refers to an individual or a group, practicing his or their profession or calling, with or without license under a regulatory board or body. ”
Hope this helps.

Margie, go to your city / municipal legal officer for their interpretation of that BIR document. If that legal officer agrees, ask him/her to write a note or call the head of licensing explaining their interpretation.

Thanks for the info.. hmmm I dont know why on our municipality explained to me that I dont need PTr. by the way do you have a Cash Disbursement Journal and Cash Receipt Journal ? thus it require accountant to sign or can I sign this by my self?

If your municipality / city does not require you a PTR or even an OTR, ask them to write an official letter addressed “to whom it may concern” or to your local BIR stating that they don’t require a PTR or OTR for your occupation. Present that letter and that BIR document I posted earlier to your local BIR in case they insist on a PTR / OTR as one of the requirements for your BIR taxpayer registration.

Regarding books of accounts or accounting journals, I think no one needs to sign it except the BIR officer who registered such books / journals.

To avoid open cases, file/pay your quarterly income tax returns (QITR) as well. QITRs help reduce the unpaid balance of your annual income tax.

If your total annual income tax this year exceeds two thousand pesos, you may opt to pay at least 50% on or before April 15 deadline next year and pay the remaining balance on or before July 15 deadline next year.

for Cash Disbursement Journal and Cash Receipt Journal do we really need to have an accountant for this to sign? also is this done Quarterly to sign? let me know… I cant afford to pay account or I can sign by my self??

Thank you for this blog! I’m currently following this while registering in BIR. First, I was asked to get Mayor’s Permit but when I asked about “PTR”, they said that it depends on the City Hall Staffs if they can give us PTR. So yes, I was able to get PTR from City Hall and went back to BIR.
Right now, my problem is that they are asking me for a Business Address, my family doesn’t have title or tax declaration of the house(current), so I do not know how can I give them a proof of ownership. I asked if Barangay Certification will be fine, but they said that it cannot be used as proof of ownership. Another situation is that, my family owns a lot in a subdivision and currently on the progress of house construction. Can I use the tax dec/land title of that lot even if the house isn’t completed yet?
Thanks!

Hi Julia. I’ve been looking for this kind of blog for a long time. Thank you for posting it. However, I am still quite confused regarding the tax rate. I am working as an on-line ESL teacher and the company deducts 10% monthly tax from my earnings. We are considered as independent contractors/professionals according to them that’s why they deduct 10 %. But my question is, let’s say your earnings for the month is just around 8,000, should the company still deduct 10% tax rate from it? Or does REPUBLIC ACT NO. 7496 apply to this?

For example:
Earnings for July 2500 less 10% (250) = 2250 total monthly earnings
Is this right? Shouldn’t there be exemptions even for individual contractors?
Thank you.

Hi Jenny. Being a contractor, it is correct for them to deduct 10% expanded withholding tax. This is a creditable tax withheld at source. (It will be 15% if you are earning gross of more than P720,000 per year)
Now, when you compute and file for your Annual Income Tax, you will now be subjected to the Income Tax rates based on what bracket you will fall. From your total gross income for the year, you can deduct all the taxes previously withheld from you, including a personal exemption of P50,000 and additional exemptions for your qualified dependents.

Hello, thank you for the informative article. I will be a freelance english teacher which is home-based. This will also be my first job. I am only planning to work lets say 2 months then I wont be a freelance anymore. Because this is just a part time job for me. Assume that i pay my taxes every month. What about the succeding months wherein i dont work anymore? Should i just leave it like that or should i close my “freelance business” and inform the BIR? This is my first time with tax and stuff.

Hi Lindsay, First you have to process your registration with the BIR. Afterwards, you have to file your tax returns regularly whether you have operations or not.
In the event that you go into another business or become employed, you’ll have to update your registration information.

Wow this blog is really informative!! It’s my first time being an independent taxpayer since I’ve been with an employer ever since. I have a question! This applies also to freelancers who are not necessarily online right? Also, I see monthly, quarterly, and annual taxes based on the blog – my question is do I have to pay all of those? Or do I choose one preferred method of paying taxes (meaning I’ll pick if I want monthly or quarterly or annual)? Also if I’ll only choose 1, are the total tax equal for all? Or is paying monthly ‘cheaper’ than annual payment, etc. Thanks for your help!!

Regarding your questions:
This applies also to freelancers who are not necessarily online right? – Yes

Also, I see monthly, quarterly, and annual taxes based on the blog – my question is do I have to pay all of those? Or do I choose one preferred method of paying taxes (meaning I’ll pick if I want monthly or quarterly or annual)? Monthly is the monthly percentage tax. You pay taxes either annually or quarterly.

thank you for making this so easy for non-accounting people. I have questions too. This may been asked by other people who commented but please bear with me. (I tried reading ALL the comments but I started zoning out, sorry!) My questions are: if I file my taxes online, will there be a need for an accountant’s signature for the annual filing? If I choose OSD, will I need to save all my transaction (income and expenses) receipts? Thank you for the enlightenment!

If I file my taxes online, will there be a need for an accountant’s signature for the annual filing? – Not really sure about this one. I will ask our accountant. But I hope our readers who are accountants who can also answer this question

If I choose OSD, will I need to save all my transaction (income and expenses) receipts? No. If you choose OSD, you don’t need to save the receipts of your expenses.

Hi Jean! Whether submitting online or manual, You won’t be required to have an accountant sign on your ITR. The taxpayer himself can sign on the ITR.
You just have to ensure yourself that the details you have provided in the return are correct and true to the best of your knowledge.

It’s better you register as a self-employed professional even before you actually earn. Get the checklist of requirements from your nearest BIR office and comply.
You may check your exact occupational classification thru the following link:http://www.bir.gov.ph/images/bir_files/research_and_statistics/NSCB_PSOC_2002.pdf
Tell the BIR person in charge of taxpayer registration your exact occupation even its code because you are more familiar with your occupation.
You’ll be required to attend the BIR briefing for new taxpayers, that’s when the books of accounts like journals and official receipts will be explained/clarified.
When you become an officially registered taxpayer, even if you have no transaction for a particular taxable period, you are still required to file the applicable no payment tax return/s to avoid open cases.

I work online as a freelance tutor and my students are abroad. I have to file first percentage tax this week but BIR told to issue receipt? Do you do this receipt and journal stuffs? Also when I am going to BIR this week to pay my first percentage tax do I have to bring the receipts as well as the journal or I am going to just tell how much I earned in 1 month (month of July)

Issuing receipts and recording transactions on books of accounts like journals are SOP. Just file your monthly percentage tax return. You don’t need to bring receipts and journals every time you file tax returns. Bring them only to the BIR after you received an official WRITTEN notice from them requiring you to do so.